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Prepared by Muhammad Faheem

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Keeping in view the complexity of the issue, the group decided to take issue collectively
instead of having a moderator.

At the start, the text given in the write up was read out to develop an understanding of
the issue. It was followed by discussion about SAP modalities, requirements and
implications. The policy areas hit by the SAP conditionalities were identified e-g export-
led growth; privatization and liberalization of trade, promotion of free market economy,
balancing the national budgets, avoiding the overspending and removing price controls
and state subsidies. While discussing the approaches adopted by donors for SAP, it
was pointed out that while negotiating and advancing the SAP credits, the World Bank
is friendlier to the recipients of the loan proceeds in certain respects, whereas, the IMF
has been more rigid on the same account. There was an agreement of the house that
the SAP conditionalities like devaluation of currency, removal of subsidies on basic
necessities like food items or imposition of service/user charges on state provided
services hit the poor most and are counterproductive in real terms.

   
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Mr. A was of the view SAP credits are rigid in their terms. The solutions provided
through these credits are staright jacketed and |

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in approach which may

not be commensurate with the objective conditions of the recipient economies. He
pointed out that India rejected the second SAP credit offer for the reasons that the
conditionalities attached to it were not suiting them.

Mr. F said that SAP conditionalities have more than one dimensions, therefore, the
impact of the SAP loans especially the expenditure out of PRSP Funds is not boring the
fruits because its impact is being nullified by other policies adopted under similar
credits.

Mr. M opposed the notion that ³if you avail the SAP facility 20 times consecutively, the
performance of your economy is destined to improve´. He cited the fate of certain Latin
American and African countries whose economies dipped despite repeatedly availing
SAP loans.

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The next question floated before the house was: Can our economy go ahead without
such loans/credits?

Mr H was of the opinion that economies like ours are pushed towards the SAP credits.
Mr. F quoting the PRSP as an example said that our govt. is constrained to avail such
offers to improve the foreign exchange reserves and to meet the BOP requirements.

Mr. R was of the opinion that SAP credits are negotiated without much homework. The
chair pointed that the negotiation teams include the economic managers, some of whom
happen to be the bureaucrats and, hence, it cannot be said that the conditionalities are
imposed upon us. Our part is always there and PRSP is based on our consensus.

A participant argued that without resorting to SAP credits we would not be able to meet
the MDG targets. Mr. S was of the view that MDGs are UNDP lead initiatives and not
SAP linked. We should seek alternative sources for achieving MDGs as the
conditionalities attached with SAP credits are a restrain in this respect.

Mr. M was of the view that a significant contribution, volunteer in nature and without any
attached conditionalities, is being made by foreign remittances from oversees Pakistan
in the Middle East. In order to improve the BOP position, we should focus on this source
through enhanced efforts to improve our technical education and facilitating technical
graduates¶ employment in Middle East and elsewhere. That is a viable option to reduce
our dependence on SAP Credits for improving the BOP situation.

The Chair pointed that Bretton Wood institutions lend the money as commercial entities
and as lenders they ensure the intended use of their funds as well as return through
conditionalities. No doubt the loans are soft in terms of interest rates yet the other costs
attached to them are much higher.


   
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