Author: Kathy Gannon
Publication: The Associated
Press
Date: November 30, 2000
Islamabad, Pakistan (AP)
- After tough negotiations, the International Monetary Fund agreed Thursday
to give cash- strapped Pakistan a $596 million loan.
But the IMF imposed a
number of conditions: Pakistan has to follow through on its promise to
collect more taxes, clean up a corrupt tax system, reduce its budget deficit
and free-float the Pakistani rupee, an IMF statement said.
Pakistan will get an
immediate $193 million, which is expected to be used to make payments on
its hefty $32 billion debt.
Officials here quickly
praised the IMF move.
''The fund support is
a significant breakthrough in our efforts to give the economy a kick start,''
Finance Minister Shaukat Aziz told a news conference in the federal capital,
Islamabad.
The loan approval gives
Pakistan its first IMF money in nearly two years. The fund stopped
paying out an earlier $1.2 billion loan during ousted prime minister Nawaz
Sharif's rule after his government failed to live up to the agreed terms.
A military government
seized power from Sharif in October 1999. The new loan was approved
after the military regime launched a massive structural reform program.
''A fundamental overhaul
of the income tax system is underway,'' the IMF statement said. It
added that Pakistan plans to institute new laws aimed at ''establishing
a simple income tax, based on genuine self-assessment, with minimal exemptions,
and a less distorting rate structure.''
Military ruler Gen.
Pervez Musharraf has said it is a blight on Pakistan that only 1.2 million
people in a country of 140 million pay taxes.
After seizing power,
his army-led government set about trying to document the country's economy
- a difficult task in a nation where business transactions are traditionally
done on a cash-only basis without receipts. The army rulers also
ordered businesses to pay taxes, something they resisted with a series
of one-day strikes and demonstrations.
In keeping with the IMF
demands, Pakistan also has gradually floated its currency, removing some
restrictions on how much it can fluctuate. The rupee quickly dropped
in value afterward, losing 7 percent in the first two weeks of October.
The current exchange rate is 61 rupees to the U.S. dollar.
In addition to the IMF
money, the government's reform plans will get help from the Asian Development
Bank, World Bank, bilateral official creditors and the private sector,
said the IMF statement. It offered no specific figures.
The IMF approval greatly
improves Pakistan's chances of getting a restructuring agreement from the
Paris Club, a group of private lenders, when it meets them in January 2001.
