International financial institutions and the donors
stand by to help Pakistan, Adnan Mazarei, director for
Pakistan at the IMF, said. The extent to which they are
willing and able to support the authorities depends on how well
the authorities in Pakistan also take care of the Pakistani
Mazarei, who negotiated the IMFs $11.3 billion loan
with Pakistan, said the government had to move quickly to
reassure the donor community and the IMF that it was committed
to transparency in the use of aid for the floods, as well as
reforms that have been due for several years.
These centre on the introduction of a sales tax and the need
for agreement with the World Bank and Asian Development Bank on
$2 billion of subsidies for the energy sector.
Mazarei warned the Pakistanis to review their spending on
things that need to be reconsidered, such as
subsidies to the national airline and steel companies.
These issues have been on the plate for a couple of
years and to be honest, well before the programme,
Mazarei said. It is time to move forward. Action is
needed quickly to move forward with reconstruction.
The IMF granted Pakistan its loan in 2008 to help the
country avoid a default on its foreign debt. In July this year
it missed a deadline for the introduction of the sales tax,
which has little political support.
Tax currently accounts for just under 10% of GDP. The loan
is due to expire at the end of this year but Mazarei said it
could be extended to the extent that the Pakistani
government take the measures that are needed.
In recent weeks, the World Bank, the US, Japan, the UK and
the UN have pressured Pakistan to improve transparency of aid
expenditure, and to raise money through taxes. Just 1% of the
Pakistani population now pay taxes.
The government is also struggling with a recent challenge by
the army, which was reflected in a public rebuke of President
Asif Zardari by army chief General Ashfaq Parvez Kayani.
Zardari also faces pressure from the Supreme Court, which is
due on 13 October to rule on a challenge to an amnesty law that
some contend illegally shielded Zardari and thousands of former
and current officials from corruption cases.
The Chief Justice has warned the Prime Minister over his
defiance of a court order demanding that he write a letter to
Swiss authorities requesting they reopen a moneylaundering case
involving Zardari. Legal experts say he could be found in
contempt of court.