A check on fiscal policy

When even the IMF begins commenting on the nation’s law and order situation, perhaps it is time for the government and politicians on the right of the political spectrum to come out of their denial and wake up to the dangers of home-grown extremism. The IMF normally refrains from even hinting at any political position, so the fact that it has bluntly highlighted security as the biggest threat to the Pakistani economy should not be taken lightly.

That the militant threat is sucking the life out of the Pakistani economy is by now a well-documented fact. What makes the IMF’s position interesting is that it crystallises in writing what has hitherto been the unwritten consensus among global investors about the Pakistani economy: it holds enormous promise, but is held back by an ostrich-like mentality when it comes to confronting terrorism. The IMF sets the benchmark against which the government’s economic performance is judged. The IMF has decided that politics and economics are too intertwined in Pakistan to be separated.

The Washington-based lender said the government of Pakistan habitually goes back on its word. For a government trying to attract global capital into the economy, there could hardly be a more damning indictment of fiscal and economic policy. The IMF also pointed out the many absurdities that are now the cornerstone of the finance ministry’s strategy to manage the government’s money. For instance, the government now refinances half of its total debt every three months, effectively running the entire country in roughly the same manner as the large US investment banks shortly before they declared bankruptcy. For the finance ministry to effectively gamble with the country’s future so foolishly is nothing short of insanity. In short, the IMF’s harsh words only say publicly what much of the world says privately: Pakistan cannot be helped unless we as a nation first decide to help ourselves.

Published in The Express Tribune, September 15^th, 2013.

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