During a recent visit to Pakistan, only days after a devastating earthquake killed at least 54,000 people in the north of the country and neighboring India, IMF Managing Director Rodrigo de Rato assured President Pervez Musharraf and Prime Minister Shaukat Aziz that “the IMF stands ready to support Pakistan at this difficult time.” De Rato’s visit to Pakistan on October 17 was part of a four-country trip, which also included stops in China, Saudi Arabia, and Belgium.
China. In Xianghe on October 15, de Rato attended the Group of 20 meeting, assuring participants that all IMF members should enjoy fair representation in the institution. He later told the press that “we will work to give a greater voice in the IMF’s governing councils to those regions and countries that have emerged as important forces in the global economy, especially Asia.” Describing China’s economic success as “central to the overall strength of the global economy,” he urged the Chinese authorities to continue implementing prudent economic policies and structural reforms— especially in the financial sector, public finance, and labor markets—to help raise living standards, enhance income distribution, and improve China’s further integration in the global economy. During a meeting with Chinese Premier Wen Jiabao the previous day, he reaffirmed the IMF’s strong support for China’s reform of its exchange rate arrangement this past July.
Pakistan. In Islamabad, de Rato met with government leaders and key ministers, offering condolences on behalf of the IMF to the Pakistani people. The visit, which had been long-planned, allowed de Rato to discuss the human and economic costs of the previous weekend’s devastating earthquake and how the IMF could assist under its natural disaster facility, which provides emergency financing. He also visited the children’s wing of the Pakistan Institute of Medical Sciences and met Abdul Sattar Edhi, the founder of Edhi Foundation, a local charity directly involved in helping earthquake victims. De Rato praised the turnaround in Pakistan’s economy in recent years—an improvement made possible by market-oriented structural reforms supported by macroeconomic stabilization. He said the key challenge over the medium term was to sustain higher growth rates, boost living standards, and reduce poverty. This will require efforts in several areas, including substantially increasing investment, raising government revenue by broadening Pakistan’s low tax base, and increasing foreign trade. Although the earthquake is unlikely to dent Pakistan’s current strong economic growth substantially, he said, it adds to the country’s near-term economic challenges, such as higher inflation rates and increased oil prices. Reconstruction costs could lead to some increase in the budget deficit in the short run.
Saudi Arabia. In talks with King Abdullah of Saudi Arabia and other senior officials, in Jeddah on October 18, de Rato commended them for their role in support of oil market stability and for using a large part of recent fiscal surpluses to invest in much-needed infrastructure, health care, and education. He expressed the IMF’s appreciation for Saudi Arabia’s role in providing economic and financial support to countries in the region, as well as developing countries, generally.
Attending a meeting of the finance ministers and central bank governors of the six-nation Gulf Cooperation Council (GCC), he welcomed the GCC’s decision to significantly increase oil production to meet rapidly growing market demand and fully endorsed GCC members’ investment plans to expand oil and gas output capacity. Voicing strong support for the GCC’s aim to establish a monetary union by 2010, he lauded the progress in regional integration so far and offered the IMF’s help in the form of policy advice and technical assistance.
Belgium. On the last leg of his trip, de Rato stopped in Brussels, on October 19–20, to participate in a meeting of the Capital Markets Consultative Group—a forum for informal dialogue between participants in international capital markets and the IMF. De Rato also met with the European Parliament’s Committees on Economic and Monetary Affairs, International Trade, and Development, as well as representatives of the European press. He told members of the European Parliament that he was keen to have regular contacts and cooperation between the IMF and the European Parliament.