Pakistan and the IMF trap

With Iran and Saudi Arabia ready to embrace each other, Turkey looking forward to mending its broken ties with Syria and Egypt, and Afghanistan being able to form a club with Central Asian States and Russia, it seems that Pakistan is the only one in the immediate region that has failed to breathe the changing air of the international order — one that is not ready to defy the old, rotten ways of unilateral, unidirectional capitalist liberalism of the West that uses the IMF as an instrument of bleeding living nations to their last running drop of blood.

What the IMF has been up to with nations around the world is no secret, but it is amazing how the intelligentsia of a nation can act in complete defiance of both history and contemporary world events. There are numerous examples, but we as a people tend to follow constructed popular narratives and show little interest in global realities. Still, let’s go through some eye-opening cases.

Mali, one of the world’s poorest countries, had a major cotton sector upon which its economy relied. In the 1990s, the World Bank and IMF started pressing for privatisation of the Malian cotton sector and liberalisation of its pricing system, tying cotton prices to world market values. These reforms coincided with a period when the cotton prices were heavily distorted by subsidised production of cotton in developed countries. As a result, Malians had to sell their crops at less than production costs, eventually pushing farmers to grow other crops.

When the 2008 financial crisis struck, Greece was having a $299.7 billion external debt. With Greece unable to pay back its loans, the troika of European Commission, European Central Bank and IMF charted a set of reforms including 12 rounds of tax increases, austerity targets, institutional elimination of social benefits, privatisation targets, administrative and judicial changes and so on. Despite these efforts, and despite getting a €100 billion debt relief, the country required bailout loans in 2010, 2012 and 2015 from the IMF. Greek Finance Minister Yanis Varoufakis resigned, and claimed that the troika, including IMF, had exclusive control over the country’s tax system and the secretariat general of public revenues. “It was not under control of my ministry,” Varoufakis said. “It was controlled by Brussels. The general secretariat is appointed, effectively, through a process that is troika-controlled and the whole mechanism within.” Today after several IMF programmes the country’s debt stands at $406.3 billion, and is projected to rise.

The question is: with all this precedence, knowing that the IMF has been exploiting and destroying country after country, why would states still go for the IMF? The answer is bitter but simple: the IMF is an instrument of the victors of WWII, and they use it to dictate their will upon others — by using all and any means.

Pakistan, standing on $126 billion external debt today, has done everything imaginable to please the IMF since July 2022. The government has raised the GST, and increased the prices of petrol as well as electricity and gas tariffs, resulting in the cost of living to soar by 40% or more. But to the IMF, this is not enough!

US State Department spokesperson Ned Price has said the US wants “reforms that will improve Pakistan’s business environment” and doing so will make Pakistani business “more competitive” and help Pakistan attract “high-quality investment”. This means Pakistan has to open its market to western multinationals and use western-dominated ‘market connections and management systems’ that accompany their FDIs. Is this not enough to tell us that the IMF is a US instrument and they want to do with us just what they did with Mali or Greece!

But again, this is not enough, and they also want a say in Pakistan’s missile systems and maybe in our nuclear programme too. Though the IMF and US DoD have negated any such possibility, they have not yet denied that at their behest and extreme pressure, Pakistan has been forced to secretly send 122mm Yarmuk HE-Frag rockets to Ukraine, via Poland.

These are not just rockets — they are a signal of enmity towards Russia and China; they are an axe on Pakistan’s regional perspective and its peace in its neighborhood. This is also a double-play by the US and IMF: on the one side, they ask Pakistan to seek guarantee money from China and Saudi Arabia, and on the other, they force it to defy their interests in the region. The result would be no money from China and Saudi sources, no IMF staff-level signing, and a continuous ‘do-more’ vicious cycle for the government.

But even if the government takes such extreme step, that also without taking the nation in confidence, will we be better off in our economy with this debt money? Quoting economist Kaiser Bengali from 2019, “the IMF package means nothing more than some time to fill the balance-of-payments gap. It’s just breathing space.” The dollar deficit created by the deal “will further push Pakistan to look to the IMF” and that “the IMF has brought Pakistan to this stage deliberately. Now both the IMF and FATF will force Pakistan to carry out multiple drastic structural economic reforms...”

But our political elite will keep selling the people the mantra that the country cannot survive without a bailout. There is no narrative for a strong, self-reliant, proud state that can do on its own, perhaps with less commodities, but with an unbreachable sovereignty and a head held high.

Our political elite will not tell the people that the world around us is changing. The US and its pet, the IMF, are not totally formidable, they devour upon the weak but bend to the strong. This week, IMF Managing Director Kristalina Georgieva was at the 2023 China Development Forum, giving IMF forecast for China’s GDP growth as high as 5.2% this year. With this “robust rebound… China is set to account for around one third of global growth in 2023,” she said. Kristalina proposed that China should “raise productivity and rebalance the economy away from investment and towards more consumption-driven growth”, but China will choose to invest in R&D and technology acquirement, because it does not want to be dictated, rather it wants to dictate the world economy.

Today, Pakistan needs to ask itself: does it want to take the bitter pill of austerity to please the IMF, and find itself again on a ventilator at the end of the bailout programme? Or, should it go through austerity and use its own tax collection for restructuring its own economy on a sustainable, progressive footing — however difficult and painful the path may be?

Published in The Express Tribune, March 31^st, 2023.

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