Oct 242008
 

By Mazhar Tufail

Pakistan will have to cut its defence budget by 30 per cent in the next four years if it agrees to the IMF conditions for a bailout package now being discussed in Dubai between the two sides, a document containing the IMF conditions seen by this correspondent reveals.

Under extremely tough conditions, Pakistan would get $9.6 billion from the IMF during the next three years at a mark-up rate of 16.7 per cent per annum, reveals the document. The IMF funding will not be rescheduled, says the document. Pakistan would also furnish to the IMF 48 hours before signing the funding agreement details of all loans it got under the bilateral and multilateral arrangements.

The document says that if Pakistan accepted the IMF funding, it would have to reduce the defence budget by 30 per cent between 2009 and 2013 gradually and would reduce the number of posts entailing pension in the government and semi-government departments from 350,000 to 120,000.

“The IMF will propose taxation structure under package of reforms in the Federal Board of Revenue and Rs50 billion increase in the current target of revenue under the head of general sales tax,” the document says.

“Imposition of the agriculture tax will be made mandatory at the rate of seven per cent on wheat production and 3.5 per cent on other crops,” it maintains. The proposals say that the Federal Board of Revenue (FBR) would submit quarterly report to the Islamabad office of the IMF for the monitoring and analysis of revenue collection as direct and indirect taxes. The IMF would propose changes wherever it wanted, it adds.

The document says the IMF representative would be part of the FBR administrative structure and offices of the fund would be set up in all the provincial headquarters to monitor the general sales tax collection at the provincial level.

The proposals also say that six IMF directors and two World Bank directors would monitor preparation of the federal budget in the finance ministry. They would give budget proposals and the Pakistan government would be obliged to comply with all these proposals.

“The Pakistan government will have to provide details of loans it got from all other lenders, including China, 48 hours before signing the funding agreement with the IMF and 25 per cent of the government assets pledged as securities for such loans will be the property of the IMF,” the document says.

The IMF intervention in the affairs of the central bank (State Bank of Pakistan), provision of the details of foreign exchange reserves and remittances as well as flow of foreign exchange through other commercial banks are among other strict conditions to be entailed by the IMF funding. No IMF or Pakistan government official was available to comment on these conditions despite several attempts by this correspondent.

The News, 24/10/2008

 Posted by at 10:46 am

  One Response to “ISLAMABAD: Bitter fruits of IMF bailout”

  1. I think IMF official should just be given control of the entire finance ministry.
    It would have the benefit of a] possible improvement of financial outlook for pakistan
    b] someone non-pakistani to blame if things go wrong.

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