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NATIONAL INSTITUTE OF MANAGEMENT

KARACHI
35th Mid-Career Management Course (MCMC)

IMF targets and Government Initiatives:

An Analysis

By

Samiullah Shaikh (PAS)

Faculty Advisor: Mr. Waqar Saleem Baig, DS (T&C)

Sequence of Presentation
• Introduction
• Why does a country approach IMF?
• Pakistan’s IMF Programs
• IMF Targets – 13th Bailout Package
• Government Initiatives
• Challenges and Issues
• Analysis & Conclusion
• Workable Solution Matrix

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Currency of Topic

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Introduction
• Multilateral financial institution established in
1944 to promote International Economic
Cooperation

• Promotes the stability of global monetary

systems and provides technical and financial
assistance to overcome Balance of Payment
crisis

• Provide its member countries with short-term

loans if they experience a financial crisis or a
shortage of liquidity for International Trading

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Contd…
• The five largest contributors to the IMF are the United States
(16.75%),Japan (6.23%), Germany (5.81%), France (4.29%), and the
UK (4.29%)

• IMF programs have three components: financing packages, structural

reforms and macroeconomic policies.

• Pakistan became member of IMF in 1950

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 Devaluing
currencies

Encouragin
Lowering
g foreign
investment tariffs

IMF
Economic
Reforms
Reducing
Privatizing
expenditure
state
on the
owned
public
enterprises
sector
Decreasing
or ending
subsidies

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When does a country approach IMF?
• Serious current account imbalances and is unable to meet its external
payment obligations out of its own generated resources

• When the external debt obligations falling due immediately are in

excess of the country’s capacity to pay

• Most of African Countries have been prolonged users of IMF

resources – reflecting the unhealthy state of their economies

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Contd…
• In Asia, Pakistan, Philippines and Indonesia have been resorting to the
Fund for assistance more frequently

• India entered into an agreement in 1991 but exited the programme a

few years later as it recovered from the crisis situation

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Total IMF agreements/programs

Source: IMF Pakistan website - https://www.imf.org/en/Countries/ResRep/PAK 10

Pakistan’s Major Economic Indicators
S. No. Indicator Status
1. Currency Rs. 221
2. Stock Market 42000 points
3. GDP Annual Growth Rate 3.94
4. Unemployment Rate 6.5 %
5. Inflation Rate 26.6 %
6. Food Inflation 36.24 %
7. Foreign Exchange Reserves $ 13.7 Billion
8. Exports $ 30 Billion
9. Imports $ 69 Billion
10. External Debt $ 116 Billion
11. Government debt to GDP 84 %
12. External Financing Needs for 2022-23 $ 34 Billion

Source: SBP, PSE 11

 • Almost on the brink of a default on external payments
PAKISTAN’S ECONOMIC CRISIS

• Needed quick infusion of funds to sustain and support our

balance of payments situation

• Economic growth had slowed

• High levels of Inflation

• Wide gap in domestic and external deficits

• Massive flight of capital

Contd…
• Externally, a global commodity price surge (especially for food and oil)
placed immense strain on Pakistan’s balance of payments position

• To restore the lost credibility of Pakistan in the international financial

community

• All of Pakistan’s bilateral donors (World Bank and Asian Development

Bank and friendly countries) urged the government to enter into a
Fund arrangement as a precondition of financial support

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 13th IMF bailout package – Key Features

$ 6 billion 39 months

01 02 03 04 05
Aims to put Pakistan’s Increase per capita Help to reduce public Create a flexible, Get USD 38 Billion
economy on the path income debt and expand market-determined from International
of sustainable and social spending exchange rate Partners
balanced growth
Contd…
• Pakistan is expected to: 
• Increase taxation to pay off external debt
• Work towards increasing foreign exchange reserves
• Undertake currency devaluation making it determined on the market
• Grant more autonomy to the SBP
• Tighten the monetary policy
• A comprehensive plan for cost-recovery in the energy sectors and state-
owned enterprises
• Caps on Government borrowing

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Government Initiatives
• Autonomy to State Bank of Pakistan
• Adopt exchange rates and monetary policy in an autonomous manner without the
government’s interventions

• End of Subsidies in Energy Sector

• Hike in prices of Petroleum, Electricity & Gas
• Imposed taxes and petroleum levy
• Fertilizer and seeds

• Austerity Measures
• 25% cut in Public Sector Development Programme

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Government Initiatives
• Increase in Revenue Collection
• FY 2022-23 Rs. 7.4 trillion
• FY 2021-22 Rs. 6.1 trillion
• FY 2020-21 Rs. 4.7 trillion

• Increase in taxes
• Up to 30% on salaried class
• 300 % – 400 % tax on imported luxury items
• GST from 10% to 17% on 42 Goods
• Rs. 36 billion additional tax on tobacco industry
• Rs. 150 billion more taxes are in pipeline

Source : Economic Survey of Pakistan 2021-22 17

Government Initiatives
• Privatization of SOE
• Plan to privatize 44 entities by 2025 including PSM, 10 Power Companies, Jinnah
Convention Centre Islamabad etc

• The Government has committed to build foreign exchange reserves

• Cover at least 10 weeks of imports by end of the current fiscal year from existing
5 weeks and not to use those reserves ever to support the exchange rate

• Reduce Poverty and Strengthen Social Safety

• Cash transfer programmes expanded to Rs. 316 Billion to cover 9 million families

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Government Initiatives
• Efforts to get funding from friendly countries
• $ 2 billion from Qatar
• $ 6 billion rescue package from Saudi Arabia
• $ 1 billion of investments from UAE in various sectors

• Incentive to export oriented industries

• Rs. 100 billion package to export oriented industries particularly textile sector

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Challenges & Issues
• Pakistan has never worked on long term transformation of economic
structure

• Short term injection of liquidity to avert foreign exchange shortages

• Only cosmetic changes were made to obtain IMF and other external
financing and then go ahead with business as usual

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Challenges & Issues
• Inflation is at record high

• Exchange rate is still unstable

• Unemployment is still a burning issue

• No Foreign Direct Investment, CPEC has slowed

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Challenges & Issues
• Exports are not increasing at the desired pace

• Foreign exchange reserves are still low

• Political instability

• Floods 2022

• Growing tensions with our neighbors

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Analysis
• The commitment to carry out reforms for future economic independence and
stability was missing in all governments

• Every government implemented the softer measures that were easy to execute and
avoided the tough ones. Sometimes governments manipulated the numbers and
achieved the policy targets on paper only

• For tough measures we asked for waivers or suspended the programs without
achieving the targets

• Unless we ourselves manage our affairs with commitment and in a professional

manner no program can alter the fate of our economy
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Analysis
• Farsightedness along with political will are the essential requirements
which should motivate the masses to contribute to the national
exchequer by setting examples

• No other foreign donor agency or organization can help us unless we

are prepared to change our own destiny through tight fiscal measures

• There is nothing wrong with conditions/parameters laid down by IMF

but our level of commitment and sense of responsibility are the missing
links between the goals and achievements
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Conclusion
• Pakistan is rich in human and material resources but poor governance
of the country has hampered the process of economic growth and
development

• A coherent long term national economic agenda that is jointly

approved by the major political parties, and implemented by all
governments through a transparent institutional framework, and not
on the basis of ad hoc decisions or individual whims

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Workable Solution Matrix
S # Action Description Lead Stake holders Key Time Frame
Implement Performance
er Indicator
1. Strong Economic Team In order to Federal Federal Govt/ - Ongoing
needed negotiate Govt Prov Govts
with
international
donors
2. Privatization of SOE Loss making Federal Fed Govt / - Two years
SOE need to Govt Employees of
be privatized SOE

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Workable Solution Matrix
S# Action Description Lead Stake holders Key Time Frame
Implementer Performance
Indicator
3. Increase Exports Exports will Ministry of Fed Govt / 15% - 20% On-going
help reduce Commerce / Prov Govts / increase /
trade deficit / Industries businessmen year
balance of
payment
4. Good Governance Non All Govt Prov Govts / - On-going
performing Depts investors and
institutions General
hampers public
economic
growth

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Workable Solution Matrix
S# Action Description Lead Stake holders Key Time Frame
Implementer Performance
Indicator
5. Power Sector Reforms Circular Debt, Ministry of Federal Govt, Zero Circular Two Years
Line losses Energy Industrialists, Debt and 4%
are extra population Line Losses
burden on
the economy
6. Tax Reforms taxation on Federal Board Land Lords, - Two Years
agriculture of Revenue businessmen
income, stock etc
market, real
estate is
required and
services
sector

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Workable Solution Matrix
S# Action Description Lead Stake holders Key Time Frame
Implementer Performance
Indicator
7. Increase FDI FDI is reqd for Ministry of Fed Govt, - On-going
industrial Commerce, Foreign
production all Prov Govts Investors
and job
creation
8. Targeted subsidies, Aid or Ministry of People living - On-going
investment in health support poor Health & below the
and education sector segment of Education poverty line
the society
9. Efforts to Increase Major Source Foreign Office Workers in - On-going
Remittances of Foreign Foreign
Exchange Countries

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Workable Solution Matrix
S # Action Description Lead Stake holders Key Time Frame
Implementer Performance
Indicator
10. Poverty Reduction Aid or Ministry of People living - On-going
Programmes support poor Poverty below the
segment of Alleviation poverty line
the society and Social
Safety
11. Control on High bank Leaves little State Bank of Fed/ Prov - On-going
borrowing space for the Pakistan, Govt, All
pvt sector Ministry of Commercial
financing Finance Banks

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Workable Solution Matrix
S# Action Description Lead Stake holders Key Time Frame
Implementer Performance
Indicator
12. Political Stability Imperative for All Political - On-going
Economic institutions/ Parties
Stability and Political
investment Parties
13. Improve Balance of Greater Ministry of Exporters, - On-going
Trade surplus Commerce, Industrialists
means better Finance
GDP of the
Country
14. Control Current Account Import of SBP, Ministry Industrialists - On-going
Deficit goods and of Finance / importers /
Services is traders etc
more than
the Exports

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THANK YOU
Q&A

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