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A Letter to the Editor
By Henri Ghesquiere
IMF Senior Resident Representative
Islamabad, Pakistan

Dawn
December 13, 2001

Dear Sir,

Your editorial of December 10, 2001 on the approval by the IMF of a US$1.3 billion loan to Pakistan under the Poverty Reduction and Growth Facility merits a response.

Asserting that poverty alleviation, economic growth and financial stability are likely to be mutually exclusive goals is incorrect. They are mutually reinforcing. Many countries over the past forty years have achieved substantial progress on all three fronts. In these countries, improved governance and implementation of judicious economic policies have encouraged high-quality, export-oriented, labor-intensive private sector investment from domestic and foreign sources. This has resulted in significant gains in income growth and expansion of broad-based health and education programs, without impairing financial stability. Pakistan too could turn the negative experience of the past decade into a virtuous spiral with progress in one area reinforcing achievements in others.

Further, your characterization of Pakistan's economic performance under the recently completed standby-arrangement with the IMF as a failure willfully ignores important outcomes. The twelve-month rate of consumer price inflation has declined to a benign 3 percent. The quadrupling of Pakistan's official reserves has strengthened confidence in the Rupee. During the last fiscal year the deficit fell sharply to 5.2 percent of GDP as CBR revenue rose by 9 percent over and above the rate of inflation. Manufacturing output expanded by more than 8 percent, offset unfortunately by a drought-related fall in agriculture. Much remains to be done, but the standby-arrangement was an encouraging start.

Very truly yours.


Henri Ghesquiere
IMF Senior Resident Representative




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