So far 11 programmes have been signed successfully but implemented unsuccessfully. ILLUSTRATION: JAMAL KHURSHID
KARACHI: Finally, the government has decided to approach the International Monetary Fund (IMF) again at the cost of a fragile economy. The unfortunate chapter of the economic history, which started in the late 80s, is still continuing with full force where nothing has been achieved except for stagnant growth, slowdown in social and infrastructure programmes and inflationary impact of increasing indirect taxes.
Being a member state, Pakistan joined the IMF in 1988 and so far 11 programmes have been signed successfully but implemented unsuccessfully.
It is also an unfortunate aspect of the Pakistan-IMF relationship that nine programmes went in the accounts of democratic governments whereas two were negotiated by military regimes.
The economic managers, who have played a major role in pushing the economy into an unending debt trap, still remain the same from 1988 to present day. It is also a fact that most of the loan deals with the IMF were signed in the 90s when political instability was at the peak and caretaker governments were in place, who initiated the dialogue with the lender and the elected governments endorsed them later.
Most of the loan deals were standby arrangements through which the IMF met emergency foreign exchange needs of member states. All standby arrangements, except for one, did not reach the conclusion because of lack of implementation of tough conditions.
All expectations and tall claims about breaking down the Kashkol (begging bowl) proved unfounded when the PML-N government held negotiations for another loan amounting to $5.3 billion in an attempt to repay the previous loan. The question remains how the government will justify that in order to get rid of a previous loan it is taking another loan at more tough conditions than the previous one.
It looks like that this tunnel of debt trap does not have any exit. In this regard, the argument that there is no option other than the IMF is entirely unacceptable in the sense that there are a number of countries including IMF member states, which are facing the same instability in foreign exchange accounts but are reluctant to knock the doors of the lender with tough conditions.
India, for instance, whenever gets stuck in such a situation prefers to borrow from non-resident Indians even at higher interest rates. Pakistan can also utilise this option and borrow from overseas Pakistanis by issuing securities like bonds but it seems that the government wants to become a regular client of the IMF, which is only concerned with recovery of the lent amount and nothing else.
The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing an M Phil in Economics
Published in The Express Tribune, July 15th, 2013.
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until unless military expenditure is not controlle vicious circle will go on
Getting loans and running the country even a cook, barber, sweeper, washer man can this job; What is the use of so called experienced qualified leaders?
The exit to the Tunnel can be achieved once we start Paying our Taxes even to the Extent of 75% with honest assessment, Stop at least 50% of Electricity theft, Stop 75 to 80 % of Electricity and Gas under billing with the help of concerned departments. Not discussing the other many issues which we know but cannot express as it is in vogue in lowest and the highest levels of people at the helm of affairs, political or non political.
If the author indeed is studying for his M.Phil in Economics, he has his work cut out. He has suggested swapping one lender for another and thinks this is a solution.
“It looks like that this tunnel of debt trap does not have any exit.”
There is an exit though not the one the author has suggested. That exit is that Pakistan set aside the delusion that it somehow has been divinely anointed the power equal of India and drastically prune back her military expenditure to levels more in keeping with Pakistan's own more petite weight class. Once this reality seeps into the Nations psyche, an exit will result.
And does Bangladesh go with Kashkol to IMF Does Srilanka? +++++++++++++++++++++++++ Nice word Kahkol
"IMF, which is only concerned with recovery of the lent amount and nothing else." +++++++++++++++++++++++++++++++++++++++++++++++++ Which lender is not concerned with the recovery of the lent amount? Its only Pakistan Govt that is not concerened!
The author seems totally ignorant about the difference between "loan" and "aid". Pakistan is not getting any aid from the IMF rather it is borrowing on commercial terms just like all other economic players in the economy borrow to boost productivity and then repay the loan. The previous government had borrowed extensively with external debt shooting from USD 50 billion to USD 64 billion between 2008 to 2013. Now it is the time to repay those obligations, with around USD 3 billion payments of interest and principal repayment scheduled during the second half of 2013 alone. The existing reserves with the State Bank of Pakistan (SBP) are hardly USD 4 billion (excluding commercial bank liabilities), which are barely enough to foot the import bill of 1month against the standard benchmark of having enough reserves to foot the import bill of next 6 months. Under the above circumstances, "borrowing" from IMF is the most logical choice to repay foreign obligations, boost foreign reserves and restore investors confidence.
Rubbish. IMF are not the bad guys - and the concept that paying off low interest IMF loans by floating junk bonds to Pakistani expatriates is ludicrous. Pakistan has to borrow money because it's tax rates are one of the lowest on the planet, won't charge market rates for fuel/utilities, doesn't enforce collection of bills (taxes, utilities etc), won't cut military expenditures etc. The "harsh conditions" often touted in Pakistani article are essentially no different than what everyone else on the planet has to do - live within your means.
India also lets its currency depreciate when the need arises. Pakistan wastes dollars keeping its currency overvalued.