Pak. regrets misreporting to IMF, to refund loan

By Amit Baruah

ISLAMABAD, MAY 1. Pakistan has agreed to refund the International Monetary Fund about $ 55 million as the country's Governments in the period 1997-1999 misreported financial data figures to the IMF. This amount will be voluntarily ``repurchased'' in two instalments, the IMF Executive Board said in a recent statement.

After the voluntary reporting of erroneous accounting procedures and decision to repurchase the SDRs, many Fund directors during a discussion on Pakistan stated an IMF mission to Islamabad was being envisaged in the ``near future'', according to the statement.

The IMF, the Directors hoped, could now support Pakistan with resources to move ``forward with a bold and wide- ranging reform programme designed to achieve a high and sustainable growth path''.

Addressing a press conference on April 25, the Pakistani Finance Minister, Mr. Shaukat Aziz, said that following the voluntary misreporting disclosure, the Government was negotiating with the IMF the amount that had to be made good. Contradicting reports in the Pakistani press, he said no penalties would be imposed by the IMF.

According to the Fund statement, Executive Directors expressed concern over the misreporting of the fiscal data between 1997 and 1999. ``Following their discovery of discrepancies in the fiscal data in late 1999, the (Pakistani) authorities informed IMF staff and requested technical assistance to help with the data revision process. In response, a mission from the IMF's fiscal affairs department went to Islamabad in January 2000 to assess the magnitude of the discrepancies, and the factors responsible for the discrepancies.

``As a result of subsequent data revisions, Pakistan's budget deficit for 1997-98 was revised upward by two per cent of GDP (Gross Domestic Product) to 7.5 per cent of GDP, and the deficit for 1998-99 was raised by 1.4 per cent of GDP to 5.9 per cent of GDP.''

The IMF Board made it clear that the Fund resources were made available to Pakistan because of this misreporting of figures. ``... the directors expressed serious concern that the erroneous data had misled IMF staff and the Executive Board about economic performance; prevented the formulation and implementation of timely corrective measures; and resulted in the design of an adjustment programme that was partly based on inaccurate information. They also noted that the provision of inaccurate data had allowed Pakistan to make substantial purchases under the extended arrangement and the Compensatory and Contingency Financing Facility, and under the Poverty Reduction and Growth Facility, that otherwise may not have been available.''

The Board commended the ``current authorities'' in Pakistan (the military regime) for bringing this issue to the attention of Fund staff and also extending ``prompt and full cooperation with the staff in the data revision process''.

The statement said, ``in the light of the serious nature of the misreporting case, (Fund) directors noted the authorities' indication to promptly make a repurchase corresponding to a non- complying purchase (of SDRs) of March 1998 that is subject to misreporting under the General Resources Account (GRA) Guidelines, and to make a voluntary repurchase by May 31, 2000. In view of the authorities' expression of regret over the misreporting episode, their full cooperation during the data revision process and their prompt implementation of measures to subsequently strengthen fiscal reporting, the directors felt that the proposed repurchases constituted remedial action that was consistent with practices on misreporting ...''

Aid not cancelled

Alok Mukherjee reports from New Delhi:

Since the misreporting of economic data resulted in Pakistan securing substantial assistance which would not have been normally available, the IMF has now ordered Pakistan to return about $ 55 million in two instalments - the first immediately and the second by May 31, 2000. A Fund release has said Pakistan would have to promptly ``repurchase SDR 18.95 million in outstanding debt to the IMF and to voluntarily repurchase another SDR 22 million by May 31, 2000.'' In IMF parlance, repurchase means making reverse transfers or paying back. The total of 40.95 SDRs which that country has to pay back work out to $ 55 million approximately.

While reviewing Pakistan's action misreporting economic data, the IMF has been a bit lenient not cancelling the assistance programme altogether because it was the current military dispensation which reported to the IMF staff the ``discrepancies'' in the data pertaining to the period 1997-1999.

The IMF found that the discrepancies had arisen mainly in the domestic non-bank financing data where the amount of sales of National Savings Scheme (NSS) instruments had been erroneously recorded. External and domestic bank financing data also required revision and the corresponding adjustments had to be made to expenditure data, relating mainly to interest payments and defence spending. In addition, some unbudgeted spending was discovered.

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