INTERNATIONAL MONETARY FUND’S (IMF) STANDBY PROGRAMS The purpose of the IMF’s standby programs is to provide countries in economic distress access to resources on relatively easy terms The funds are disbursed over an 18-month period, and the recipients have to pay interest rates of about 45 percent a year The amount of money received is to be returned over a period extending from 324 to 5 years Disbursements are made following “reviews” by the Fund, in which the institution’s staff and its board of directors determine whether the country receiving help is successfully implementing the agreed programPakistan has a long history of first negotiating standby arrangements with the Fund and then midway through the period of implementation seeing them canceled The last two arrangements met the same fate In October 1996, the government of Prime Minister Benazir Bhutto negotiated a standby arrangement in which she committed herself to reducing the fiscal deficit from 62 percent, estimated in fiscal year 1995-1996, to 4 percent of the gross domestic product by 30 June 1997

This target was to be achieved by the government’s adoption of a series of fiscal measures that included widening the tax base, extending the coverage of the general sales tax, and reducing public sector expenditure Following the fall of the Bhutto government in November 1996, the caretaker administration sent Shahid Javed Burki, its economic advisor, to Washington to renegotiate the arrangement This was done in December It was after a great deal of effort that the caretaker administration was able to meet the Fund’s targets for the period ending 31 December 1996 These efforts by the caretakers resulted in the release of some US$160 million by the Fund, at a time when the country’s balance-of-payments situation was under a great deal of strain In March 1997, however, the government of Prime Minister Mian Nawaz Sharif, following a review of the economic situation, determined that it would be politically difficult for it to meet the Fund’s targets for the rest of the period Accordingly, it withdrew from the arrangement, opting instead to receive assistance from the IMF under its Extended Structural Adjustment Facility See also INTERNATIONAL MONETARY FUND’S EXTENDED STRUCTURAL ADJUSTMENT FACILITY

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