Familiarity, they say, breeds contempt. Few countries are as familiar with the IMF as Pakistan,which has previously obtained 21 loans from the fund, as many as Argentina.On May 12th this familiarity deepened further.The government, led by Imran Khan, a former cricketer who heads the Pakistan Tehreek-e-Insafparty,said it had reached a deal to borrow $6bn more over three years.
The agreement now awaits formal approval from the fund's bosses in Washington and the support of other international lenders, including the World Bank and Asian Development Bank.The loan will relieve Pakistan's dollar shortage but do little to improve the IMF's standing in the country.In return for its money, the fund expects the government to raise tax revenues and utility prices,impose discipline on provincial spending— and let the currency fall, if need be.That will help narrow Pakistan's wide trade and budget deficits.But it will also curb growth and increase inflation in the short term.Targets include cutting the budget deficit (before interest payments)to 0.6% of GDP next fiscal year (which starts in July) from the 1.9% that the IMF reportedly expects for this year.
The government has talked about removing tax breaks worth about 350bn rupees ($2.5bn or1% of GDP)and raising the price of gas and electricity for large consumers.It has pledged to give the central bank more autonomy in its fight against inflation, currently over 8%.It will also let market forces dictate the rupee's exchange rate, which has been devalued by18% against the dollar in the past year.
To ease the public's pain, the IMF will allow more spending on welfare schemes,such as a cash-transfer programme named after Benazir Bhutto, a former prime minister who was assassinated in 2007.But her son, Bilawal Bhutto Zardari, who now leads her party in opposition, seems unimpressed.After the government this month appointed a former IMF official to head the central bank,Mr Bhutto Zardari accused it of surrendering Pakistan's autonomy. "How can IMF negotiate with IMF?" he asked.A cartoon in the Friday Times, a local news weekly, showed Christine Lagarde, head of the fund, negotiating with herself.