On the surface, it seems that Pakistan is making a comeback into the good hooks of the international financial community. In the third week of January, it received a USD 575 million "bailout package" from the International Monetary Fund to improve its balance of payment situation. Following the IMF loan, came a separate credit of USD 350 million from the World Bank for reforms in the banking sector. Islamabad has also sought a rescheduling of its loans servicing with the Paris Club, a consortium of donor countries and subsidiary organisations of the IMF, and a relief of USD 3.5 billion is likely from that direction.
Earlier, in September 1998, sensing the gravity of Pakistan's economic mess and a possible default in payments to lending institutions, the US government had eased the economic sanctions for one year. (It is believed that this was due to Pakistani assurances that it would sign the CTBT during 1999, a fact denounced, by right-wing religious parties led by the radical Jamat-e-Islami, as a rollback of the country's nuclear programme.)
For a country facing economic sanctions after the nuclear tests of May 1998, said the government's economic managers, the credits from the Fund and the Bank would provide relief to the economy. However, independent economists, bankers and businessmen see them only as a further burden on the ailing economy. Pakistan already owes about USD 30 billion to various lending agencies and these packages, intended to avoid an immediate default, would provide but a brief respite. Moreover, these short-term benefits will not count for much as the time will come when the country will have to pay back the money.
Neither the government nor the IMF has revealed all the conditions tagged to the latter's package, but experts believe they may include stringent economic demands such as raising power and oil prices, devaluing currency, and broadening the revenue base. The declared conditions call for a growth rate of 5 to 6 percent over the medium term, reduction in annual inflation rate to 6 percent by 2001-02 against the present rate of 9 percent, reduction in the external current account deficit from about 3 percent of GDP in 1998-99 to less than 1.5 percent of GDP by 2001-02, and improvement in social indicators.