Pakistan in the IMF Debt Trap

Editor

Poverty is bad enough but it becomes a curse if a country is burdened by crooked politicians out to fatten themselves at the expense of the people and state. This is what has happened in Pakistan where a succession of rulers has sucked the blood of the people and pilfered billions of dollars out of the country.

Pakistan is burdened with nearly $100 billion in external debt. The new government under Imran Khan that came to power last August has tried gamely to arrest the economic slide and went cap-in-hand to a number of friendly countries, mainly Arabian, for handouts but the situation has not been stabilized.

During his election campaign, Imran Khan had said he would not go to the International Monetary Fund (IMF) for a bailout package. After nine months at the helm, he has discovered that he will have to drink from the poisoned chalice. Much worse. The IMF package of $6 billion comes with stiff conditions: removal of finance minister Asad Umar and his replacement by an IMF old hand Hafeez Shaikh as well as the removal of the State Bank governor. He has been replaced by a World Bank economic hitman!

IMF conditions place a severe burden on ordinary people. Its austerity programs demand removal of subsidies on fuel, electricity, and other essential items that impact ordinary people far more adversely than the well-to-do. Prices have skyrocketed; the rupee has plunged against the dollar (currently at Rs 154 to a US dollar and is likely to reach Rs 160–170) and appears not to have hit the bottom yet. Demand for widening the tax net, though sensible, has somehow eluded successive governments. The current one is not likely to do any better either.

One barometer of economic performance is the country’s foreign exchange reserves. They were $9.8 billion in August 2018 when this government came into power. Today, they stand at $8.8 billion despite borrowing $3 billion from Saudi Arabia, $2 billion from the UAE, and $2.2 billion from China.

What happened to all the borrowed money? It has been swallowed up by the annual financing gap of $12 billion. Imports remain high and will go up in price (because of the declining rupee) and exports have not taken off despite optimistic projections.

Going to the IMF may sound like a good idea but it mortgages the country’s future. It is essentially a Western financial instrument meant to control the economies of other countries. No IMF structural program has ever solved a country’s financial woes. Instead, countries receiving IMF handouts have been forced to sell their precious assets at throwaway prices to international sharks. Why should it be any different for Pakistan this time?

Pakistan’s tragedy is that there are far too many crooks occupying important posts in the country. Many are beholden to foreign interests including the IMF. More borrowing from the same criminal enterprise will not solve the country’s problem. What can and will help is the public hanging of the mega-thieves but that requires a revolutionary government. Regrettably, despite all his sincerity and honesty, Imran Khan is not a revolutionary leader.

We must sadly conclude that Pakistan will stagger from one manufactured financial crisis to the next.