KARACHI, Pakistan, Jan 26, Reuter: Prime Minister Benazir Bhutto had declared war on inflation unofficially estimated at more than 20 percent, but critics Say the government has yet to Provide specific details of how the battle is to be won.

My government plans to achieve economic self-reliance reporters earlier this month.”

“All we hear is propaganda,” Retorted Mahbubal Hag, Finance Minister under the President Mohammad ZiaulHaq in the Senate last week.

Controlling inflation is one of the conditions set by the International Monetary Fund as part of an 813 million dollar aid package signed with Pakistan last year.

A Five member IMF team is arriving at Pakistan’s invitation to renegotiate conditions on spending controls and monetary expansion.

Banking sources say Pakistan’s total foreign debt stands at just over 15 billion dollars, with an average maturity of 26 years for public multilateral debt and an average interest rate a little over five percent.

The agreement with the IMF ‘was signed by the caretaker administration in office between Zia’s death in a mysterious plane crash in August and Bhutto’s November election victory.

Bhutto, who blames Pakistan’s economic woes on 11 years of Zia’s rule, says inflation is running at 18 percent.

Latest figures from Pakistan’s Federal Bureau of Statistics show consumer prices rose 11.20 percent in November, compared with 6.81 a year ago. Wholesale prices rose 9.80 percent against 9.94 percent.

The inflation rate is certainly more than 18 percent,” says Haji Hussain Shakoor, a leading Karachi Stockbroker, “it’s more than 20 percent.” Bhutto, 35, who took office on December 2 as First Woman Prime Minister of a Moslem nation, says Pakistan has virtually been mortgaged and deficit financing has pushed inflation to its current level. “The government has decided to end deficit financing,” she said.

The IMF, as part of its conditions for the Aid package, advised Pakistan on policy and financial reforms and said it must keep domestic inflation to 10 percent in 1988/89 and reduce it to six percent by 1991.

It also called for improved domestic debt management, more efficient credit allocation and the maintenance of positive real rates of return on Bank accounts.

The IMF also wants better supervision of financial institutions.

The deregulation of public enterprises and changes in import policies, “Major steps are being taken to counter the growing inflation and to stabilize prices,” said Bhutto financial adviser VA. Jafarey.

“The previous government increased expenditure but failed to. Raise adequate resources, thus allowing a huge budgetary deficit,” said Jafarey, former Governor of the State (Central) Bank of Pakistan.

“The Government will aim at bringing inflation down to seven percent.” he said.

Article extracted from this publication >>  February 3, 1989