KARACHI, Oct 20: A much-awaited economic bailout package for cash-strapped Pakistan was in jeopardy today as the International Monetary Fund (IMF) indefinitely postponed a planned visit. The IMF has said that a team of its officials will not arrive in Pakistan on Wednesday as earlier scheduled and no new date has been given for their arrival mainly due to a dispute between the Pakistan Government and independent power producers (IPPs).This has caused panic in the financial sector with experts warning that the country is inching towards a default-like situation if matters are not rectified.
Last week, the Government of Prime Minister Nawaz Sharif announced that it was initiating criminal charges against the Hub Power Co, a joint venture with National Power of the UK and the largest IPP in Pakistan. On Sunday, Sharif announced on national television that Hubco was found guilty of paying kickbacks to senior Government officials in the Government of former Premier Benazir Bhutto.
While Hubco stronglyrejected the charges, Sharif announced that it would cut the rate at which it buys power from Hubco and pass on the benefit to the consumer. Sharif announced a 30 per cent cut in power tariff surcharge as a result of the measure.
The IMF, which is negotiating the resumption of a loan agreement with the Pakistan Government was not impressed. On one hand it says that power rates are low and should be raised to initiate a process of reform in the State-owned Water and Power Development Authority (WAPDA).
Also, the IMF wants the Government to lay off IPPs which form the largest chunk of foreign investment in the country. In some of the power projects international organisations like the IFC and the World Bank are involved.
"To charge that there has been corruption would be putting blame on the doorstep of the World Bank or the IFC and this is not on,'' said one expert.
While on one hand Sharif says that he will not take dictation from the IMF, the announcement by the IMF has shaken the Government.Commerce Minister Ishaq Dar told reporters in Karachi that the Government was working towards a ``quick resumption of the talks with the IMF.''
"Pakistan is looking at a financial crisis in the face,'' said one economist. Only the resumption of funding from the IMF will put it back on track towards economic revitalisation. But this would mean hiking power rates and coming to terms with the IPPs which were signed on by the Bhutto Government. For Sharif, this may be a bitter pill to swallow.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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