After boastful claims by the previous government that Pakistan no longer needs help from the IMF, the present government was compelled to once again approach the powerful lending agency, due to dismal economic circumstances which had brought the country to the brink of default. Since 2008, Pakistan has received nearly $8 billion out of an $11.2 billion loan from the IMF, but the remaining amount has been suspended since May 2010 due to Pakistan’s inability to meet conditions attached to the loan arrangement.
Despite securing such a massive loan and adding to the already enormous debt burden of the country, there were indications suggesting that Islamabad wanted to secure another loan of over $3 billion to continue meeting its most pressing financial obligations, including the repayment of earlier debts.
The Pakistan delegation has thus gone to the annual spring meeting of the IMF and the World Bank in Washington DC, in an effort to convince the IMF to at least restore the existing loan programme. But they are having a tough time doing so.
On average, Pakistan’s GDP has increased annually at a rate of 4.2 per cent between 1972 and 2010. But this increase in the GDP has been very unstable and has fluctuated alarmingly, showing a decreasing trend, especially over the past decade.
To address the growing gap between our earnings and expenditures, our economic managers have been quick to curb development spending, but they remain hesitant to implement progressive taxation on wealth, including on agricultural incomes.
Conversely, our economic pundits have now begun to claim that while they remain committed to the promised IMF reforms, including an end to unaffordable subsidies and the deregulation of the energy sector, it has proven very difficult to overcome opposition in parliament. The finance minister has, in fact, described the parliament as the biggest obstacle standing in the way of achieving the IMF reform targets. Such a statement provides a clear indication of the political crises being caused within the country as a direct consequence of IMF conditionalities.
Instead of rethinking the economic paradigm underlying its own lending conditionalities, the IMF conveniently passes the blame of its failures to the wrong sequencing of economic reforms by recipient countries and the lack of institutional structures necessary to support the free market.
Thus far all we seem to have gotten are US assurances of support for a time-limited trade concession deal offered to the country by the European Union, as a means of helping Pakistan deal with the economic impact of the devastating 2010 summer floods. The Obama administration has also failed to surmount Congressional objections to a similar trade concession deal that was offered by the Bush administration.
Thus, even if we manage to secure release of the remaining IMF loan, its implementation will probably remain shoddy, and will only add another chapter to the litany of failed IMF lending programmes around the developing world.
Published in The Express Tribune, April 21st, 2011.
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