The Pakistani Spectator

Up until 1999 the IMF had been using the Enhanced Structural Adjustment Facility (ESAF) as the key instrument for supporting poor countries in implementing approaches to bring about substantive changes in the way countries’ programs are formulated. Later in that year the ESAF was replaced by the Poverty Reduction and Growth Facility (PRGF) which places the reduction of poverty as a key objective for IMF concessional lending to low income countries.

The PRGF herefore seeks to support programs aimed at fostering lasting growth that culminates in better living standards and reduction of poverty. The key feature of the PRGF is that it aims at supporting programs from country owned and locally generated Poverty Reduction Strategy Papers (PRSP).

Poverty Reduction and Growth Facility targets to reduce inflation to the 5.0% by 2009 in order to enhance macroeconomic stability which is one of the key factors that contribute to an environment that is conducive to pro poor growth. It envisages continued and predictable donor support like the multiyear commitment to the health sector. This will provide a guarantee for sustained quality of life and human capital development.

The recent loan given to Pakistan is from the IMF’s ‘regular’ resources, a stand-by (SBA). It seems that some of the so-called economic gurus are thinking about concessional resources, such as the Poverty Reduction and Growth Facility (PRGF). Unfortunately, the PRGF has no more money left in it. In any event, the cost of the SBA is hardly excessive. With a global inflation rate of about 3-4 per cent, the inflation-adjusted cost of the SBA is around 1 per cent in real terms. Not a bad deal.

We should appreciate IMF for coming to the help of Pakistan at this critical juncture in our history, when even the friends like Saudi Arabia and china showed no interest in giving us alms.

Reference: afrodad.org