IMF Bailouts and Pakistan – Daily Times

Daily Times
Your right to know Friday, June 03, 2022

Malik Muhammad Ashraf
May 31, 2022
The talks held between Pakistan and IMF in regards to the revival of the stalled $6 billion Extended Fund Facility Programme held at Doha recently remained inconclusive because the Fund insisted on the removal of unfounded fuel and power subsidies as well as presenting the next budget for 2023 in line with the fund programme objectives. It is pertinent to mention that the PTI government during the sixth review had promised to remove the subsidies but immediately after the completion of the sixth review and the release of $1 billion from the IMF, it went back on the pledge and announced unfunded IMF programme. The decision was a breach of the agreement with IMF taken for political consideration. However, the government made no provision for financing the subsidies that it announced. It really further aggravated the economic situation.
So when the present government went to the IMF for the seventh review and revival of the programme, it found it difficult to convince the Fund for releasing the vitally needed tranche. It clearly indicated that the IMF programme would only be revived once the government hikes the POL and electricity prices and also strictly follows the objectives of the IMF Programme. Therefore the government had no choice but to raise the fuel prices. Finance minister Miftah Ismail has expressed the hope that the talks with IMF next month would produce positive results. In view of the precarious economic situation, Pakistan is not only seeking revival for the stalled $6 billion programme but also to have the size of the Extended Fund Facility ( EFF) programme jacked up to $ 8 billion till June 2023. The current programme will be completed in September 2022.
It is really regrettable to note that when the PTI government used to raise fuel and electricity prices as per the requirement of the IMF agreement the opposition which now is in the government used to severely criticize it as an anti-people act and now when the present government perforce had to remove subsidies the PTI is repeating the same rhetoric and having a swipe at the government for withdrawing the subsidies. That is dirty politics and amounts to a dishonest representation of the objectives of the IMF agreement and the economic compulsions for fear of public backlash.
No government was ever able to put the country on the path of sustained economic growth and end the country’s dependence on the IMF bailout.
The International Monetary Fund and the World Bank were both created at an international conference convened in Bretton Woods, New Hampshire, US, in July 1944. The goal of the conference was to establish a framework for economic cooperation and development that would lead to a more stable and prosperous global economy. While this goal remains central to both institutions, their work is constantly evolving in response to new economic developments and challenges.
The IMF promotes monetary cooperation and provides policy advice and capacity development support to preserve global macroeconomic and financial stability and help countries build and maintain strong economies. It also provides short- and medium-term loans and helps countries design policy programs to solve balance of payments problems when sufficient financing cannot be obtained to meet net international payments obligations. Under Extended Fund Facility, IMF provides assistance to countries experiencing serious payment imbalances because of structural impediments or slow growth and an inherently weak balance-of-payments position. An EFF provides support for comprehensive programs including the policies needed to correct structural imbalances over an extended period.
Pakistan seeking IMF bailouts is not something new and a recent phenomenon. Since 1958, Pakistan has availed the extended fund facility of the IMF 22 times–both by the civilian and military governments without a break. Till today, Pakistan has borrowed around SDR 13.79 billion from the IMF, out of which 47 per cent of the loans were secured by PPP, followed by 35 per cent by PML-N, while the military dictatorships lag behind with a mere 18 per cent. When it comes to securing loans from the IMF, the PPP is found to be far ahead in the game, having successfully borrowed from the IMF 10 times. Although the PML-N went to the IMF only four times, it secured a bigger number of loans than the dictators did during their power stints.
Imran Khan, who loathed and despised going to IMF before coming into power, was no exception to the practice of seeking an IMF bailout and his government negotiated a six-billion-dollar extended fund facility. As is evident, no government was ever able to put the country on the path of sustained economic growth and end the country’s dependence on IMF bailout in spite of the lofty claims about an economic turnaround and the country soon becoming an Asian tiger.
Why Pakistan has remained dependent on IMF assistance is the fact that the successive government firmed up their economic policies with a greater focus on populist initiatives without taking into account economic realities. The growth propelling measures remained secondary consideration. The result is that the country finds itself under the burden of burgeoning international debt which is difficult to sustain as well as muster resources for the much needed economic turnaround.
I think that the politicians and political parties, instead of doing politics on the IMF bailouts and accusing each other of the economic disaster that the country has been pushed into, have to come up with a nationally agreed economic agenda in consonance with the stark economic realities, leaving aside their egos and giving priority to the national interests rather than pursuing their narrow political agendas. The ambience of confrontation between the political entities will do irretrievable harm to the national economy and may even jeopardize the chances of the country ever emerging from the abyss of oblivion.
All the stakeholders in the future of the country including the politicians must realize the gravity of the situation and join hands to extricate the country from the economic quagmire it is stuck into. If the country survives and prospers it will be a win-win situation for all. Please prove your credentials of being patriotic Pakistanis.
The writer is a former diplomat and freelance columnist.

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