Is the IMF a real aid for Pakistan?

Is the IMF a real aid for Pakistan?

Sat, 10/25/2008 - 19:33 — fx

The Pakistan government faces quite difficult task at the moment - to find about $5 billion in a 30 days with the aim to prevent default on current account payments.

Let’s first consider what has happened that led finally to such consequences for the country’s economy? The first step was the growth of the oil prices that led to the oil import bill inflation. Then the changes in the export rules made it possible to export wheat crop surplus and thus enabled exporters to export wheat wherever they want.

So, the above-mentioned actions have led to the situation when the country itself has to import wheat at the prices that are 4 times bigger. Indeed the action is quite interesting and it is not quite clear what was this done for. Thus all this caused the situation when all import bills of the country increased and were the reason of quite large current account payment deficit. At the moment there is an urgent need for the government to find about $5 billion to prevent the default on current account payments.

So the game that the government played with the economy with the aim to get some profit in political area finally ended with the shortage of wheat and other food grains in the country. Now the gasoline prices are remained at their previous positions despite the global decrease of these prices. Furthermore, there is also an acute power shortage in the country. And the often problems with power ended with the closure of industry and as the result the growth of the unemployment.

So the situation occurred is quite difficult one. The country experience almost 25% inflation, the foreign exchange reserves are decreasing constantly and there are no investments from anywhere.

According to the ex-head of the State Bank of Pakistan the payment
system of the country is in the difficult situation, the transition from the former government to the new one was not arrange properly. And so there is no way out except of asking IMF for the help. And the IMF agrees to provide the aid required on quite undesirable terms.
Actually the main problem is in the conditions of the IMF aid. Their conditions will affect almost all areas of the country’s economy