QUETTA The International Monetary Fund has bailed out Pakistan by providing $7.5 billion credit facility with some conditionalities. The unrestricted government spending and the trade imbalance were the main causes, which led the government to seek a bailout package from the IMF.

Some naive people in politics opposed the government approaching the IMF for the credit facility thinking that it might impose certain unacceptable conditions, including slashing of the defence budget. The IMF had never imposed such conditions on the governments in sensitive regions of the world and confined itself to the task of improving the economy of those countries ensuring sustainability.

Primarily, the IMF is interested in reducing the government spending or imposing a fiscal discipline restraining the rulers to spend the public money at will. The previous government got liberal and unrestricted loans from the banks or resorted to indiscriminate borrowings to meet its day-to-day expenses.

One of the main conditions of the IMF is to stop the indiscriminate borrowing from the banks and observe the fiscal discipline in its strict sense. The second factor is to improve the balance of payment by boosting exports and curtailing imports so that the foreign exchange reserves increase enabling the government to fulfil its international obligations to payback all international loans or ensuring return of the IMF credit in due course of time.

Professor Sadiqullah Khan, an independent economist, said that the government will not abandon its spending habit and the rulers will continue to seek loans from the domestic sources and run their administration smoothly as was done by Pervez Musharraf and Shaukat Aziz and created problem for their successor.

“The Musharraf government simply ignored taking unpopular decisions to increase the oil prices for domestic consumption and it continued to pay from the national exchequer to the extent that the country came to the

verge of bankruptcy,” he said.

The present elected government, when came to power, increased the oil prices and relieved the national exchequer of the burden of oil prices. It had also withdrawn all the subsidies before it approached the IMF for the credit facility.

Another step is to reduce the government spending by slashing the development budget by Rs150 billion during the current year as part of the fiscal discipline.

He argued that it was almost impossible to boost exports in the present recession in the world economy and political and security crisis prevailing in the country.

However, a senior journalist Shahidur Rehman has different perception about the situation saying that Pakistan`s foreign reserves increased to over $9 billion after receiving the first tranche of $3.1 billon from IMF that would be used for payment of $2.5 billion loans in February 2009.

“After payment of loans Pakistan would be saved from the bankruptcy but its foreign reserves would again come at the same position that was before receiving the IMF loan,” he said adding that again the government would make efforts to get further loans from the United States and other donors.

He suggested that the government should reduce its expenditures and adopt

measures for increasing its resources. “It should impose tax on those, who were not paying tax and introduce capital tax, gain tax and gift tax,” Mr. Shahid suggested adding that the rich people were not paying taxes.”

A leading industrialist and former president of Balochistan Chamber of

Commerce and Industry Khalifa Tahir is disappointed by the economic conditions of the country saying that with obtaining loan from the IMF,

Pakistan`s economic situation would further deteriorate.

“IMF loans and wrong steps taken by the government would further sink our economy,” he remarked. He was of the view that through increasing interest rate inflation cannot be reduced and this decision would badly affect the industrial sector.

He said that repeated increases in gas and electricity tariff was also affecting the industry and other sectors that could have helped the government in enhancing exports. He suggested that the government should immediately reduce interest rate, gas and electricity tariffs and oil prices to pave the way

for improvement in the poor economic conditions.

However, another economist Mahfooz Ali Khan Yousufzai said that the government should implement the gas and oil exploration projects in the province as new gas and oil reserves have been found in different

areas of Balochistan. “If proper steps were not taken in time the country will lose its export markets due to strong competition in the international market. The government should provide facilities to the industrial sector so that it could compete in the world market.

He thought that there was little chance to improve the balance of payment by boosting exports. The only chance is to confine imports to essential items

like oil, food and other necessities as well as raw material necessary to run industries.