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Possibility of another IMF programme: Secretary Finance's statement shows lack of confidence in Dar's policies: Pasha

The possibility of Pakistan taking another International Monetary Fund (IMF) programme raised by the Secretary Finance while addressing Eurobond investors in London was simply to guarantee repayment.

This was stated by Former Advisor to Prime Minister on Finance Dr Hafeez Pasha who added that the Secretary's statement is an expression of complete lack of confidence in the economic policies pursued by Finance Minister Ishaq Dar-led economic team to build foreign exchange reserves.

Pasha questioned the wisdom behind building foreign exchange reserves by taking foreign loans followed by the need for the government to come up with such statements to lure foreign investors to buy its bonds. Pasha said as the repayment of $6.64 billion Extended Fund Facility (EFF) as well Eurobonds would be due in 2018, foreign exchange reserves are expected to deplete swiftly at that time.

When asked about the implications of another loan, he said that it would be at the cost of growth and disastrous for the economy.

Former Advisor to Prime Minister said that the government's performance was dismally poor in terms of increasing the country's exports, which have witnessed a decline of 7 per cent during the last two months when exports of neighbouring countries, Indian and Bangladesh, have been growing. The country's balance of payment position was supported by the remittances so far however the growth in remittance was also flat during the last two months. Hence, he said that the statement by a senior official of Finance Ministry, Secretary Finance Dr Waqar Masood, when there is still one year to go in the ongoing EFF, indicates the government intentions to borrow from IMF for repayment of previous loans.

The government raised $2 billion by issuing five-year and ten-year Eurobonds last year at relatively higher than market interest rate - 7.5 per cent on five years and 8.5 per cent on 10 years. This year, the government has budgeted a minimum of $1 billion through issuance of Eurobonds and the amount can much higher in case of positive response by the investors.

Pasha said that in the absence of increase in revenue as well as growth in exports, more borrowing from the multilaterals and bilaterals would increase country's indebtedness and consequently a major chunk of the budget would be going for debt servicing. He said that he is disappointed at the government economic polices and does not see any improvement in the days ahead.An official on condition of anonymity said the repayment of Chinese loan may also start from 2017.

Copyright Business Recorder, 2015