December issue 2010

By | Business | Published 13 years ago

When Benazir’s government came to power in late 1988, caretaker finance minister, (late) Dr Mahbub-ul-Haq, had already negotiated a package with the IMF. With foreign exchange reserves at their lowest ever, the Benazir government had no option but to seek the package. The IMF package was thereby supplemented by finance and energy sector loans from the World Bank and Asian Development Bank. Under these programmes, agreed on with the two Bretton Wood Institutions, the government started a programme of taxation, energy and financial reforms, deregulation and decontrol. One of the most important commitments made by Benazir’s government was for WAPDA to not set up additional thermal power plants in the public sector. The thermal power plants were only to be set up in the private sector on the pattern of HUBCO, which was conceived and launched under prime minister Junejo’s government, with full endorsement and guidance by the World Bank. This agreement with the IMF and World Bank lies at the root of the massive circular debt and energy shortages faced by the country today.

The second package was negotiated by the caretaker government of Moin Qureshi, but signed by the second Benazir Bhutto government in April 1994. Shahid Javed Burki, the caretaker finance minister in Meraj Khalid’s government in 1997, concluded the third package, which was derailed by the Nawaz Sharif government’s reluctance to introduce a GST on the services sector. The failure of a Pakistani delegation to get an exemption in the service sector cost finance secretary Moin Afzal his job. The package was eventually completed by Shaukat Aziz who took pride in the fact that he had successfully completed an IMF package and would not seek another package.

In the 2002 elections, the PPP decried that elected governments in Pakistan had been tied down to the economic agenda worked out by unelected governments. In the Election Manifesto of 2002, the PPP said the following: “The PPP always took power after rulers signed agreements with the international financial institutions locking it into a pre-fixed framework. As soon as the PPP strengthened the economy enabling it to negotiate a better deal with international financial institutions, it was overthrown by the anti-people forces.”

The fourth IMF package was negotiated by Shaukat Tareen, another CitiBank executive, like Shaukat Aziz, and the predecessor of incumbent finance minister, Hafeez Sheikh.

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Shahid-ur-Rehman has been covering economics and finance as a journalist for three decades.