The Asian Development Bank (ADB) has requested the government of Pakistan for a letter of comfort (LoC), to be issued by the IMF twice in the past two years. An LoC is an endorsement by the Fund that the government is adhering to the reform agenda as agreed under the Stand By Arrangement (SBA), and supports the pace of implementation of the agreed conditions. Thus, any request by bilaterals or multilaterals for the LoC implies implicit support for the IMF reform agenda.
However, an article, co-authored by ADB Director General of Central and West Asia Department (CWRD) which includes Pakistan, has challenged the efficacy of the IMF reform program in the Far Eastern Economic Review saying that: "the IMF support program was signed by Pakistan in November, 2008 and time will tell if it helps or just complicates the present situation". It implied that it may well worsen the situation.
The article urged that tough measures be implemented, but argued that fiscal and monetary austerity would only aggravate the existing problems. In Pakistan''s current context, stabilisation policy can not be separated from growth policy. A failure to reduce imbalances may hurt growth, but stabilisation, in the sense of price stability and fiscal adjustment, would not necessarily lead to economic growth.
This correspondent sent an e-mail to the ADB President, the Country Director, and the head of its external department, on Thursday wherein their attention was drawn towards an apparent contradiction: the department head challenge to the IMF reform prescription and request for LoC from the Pakistan government. A simple question was asked: whether the ADB/DG of CWRD had changed views about IMF prescriptions, or whether this was being used as an excuse not to extend assistance for budgetary support? No response was received till the filing of this story, five days after the e-mail query was sent.