'Making Pak-IMF deal public to boost investor confidence'

KARACHI (Pakistan), Jan 24: Publication of the full terms of Pakistan's loan accord with the International Monetary Fund (IMF) will help boost investor confidence but achieving the target will be extremely challenging, analysts said, reports Reuters.

They said much would depend on the political will of the government and how pro-active the private sector becomes in helping it meet targets laid out in the agreement.

"To tell everyone yes this is what we have agreed helps recovered and boost investor confidence, said Qaiser Hasan, head of research at Jardine Fleming Pakistan.

Pakistan's Finance Minister Ishaq Dar unveiled the agreement before the National Assembly on Friday detailing the conditions it had agreed for the resumption of the IMF's 1.56 billion loan programme suspended after sanctions were imposed after Pakistan conducted nuclear tests last May.

He said the unprecedented disclosure was proof of the government commitment to transparency after wild speculation about what the terms might be but diplomats said making the pact public was one of the terms of the agreement.

Analysts said while the government has lifted some concerns investors were still worried it might fail to meet them since as successive Pakistani governments have for years.

"There is little evidence from the last 10 years of IMF agreements that any government has shown the will power to achieve the targets agreed with the fund, said Nadeem Nagvi, Head of Research International Asset Management.

But he said the government now had to achieve them because all other windows of external borrowing have been closed.

For its political survival the government is left with little option but to pursue these targets, he said.

The central bank has forecast a current account deficit equal to three per cent of GDP for the current fiscal year down from 3.2 per cent in 1997/98.

Hasan said he expected it to remain at that level in 1999/2000. I see a current account deficit of between 1.5 to 2 billion or 3 per cent of GDP, he said.

Hasan said the inflation target of six per cent was also not realistic, but added it could be held to single digit growth.

He added plans to remove food subsides hike power tariffs and unify the exchange rate were all inflationary.

The most critical area for the government would be to bring the large informal sector into the tax base the analysts said.

I have a question mark on this Hasan said adding Pakistan could not enforce a new retail sales tax last year which was a key to documenting the economy.

Just seven million rupees were collected in retail sales taxes last year and only 600 outlets were registered said Subahani.