Home Global Village No to IMF bail out – Farid A Malik

No to IMF bail out – Farid A Malik


Dr. Farid A Malik |

Since the late 1980s, Pakistan has availed 12 IMF bail-out packages with disastrous results. Now a 13th package is being considered as external debt has spiraled to $92 billion. To ease the pressure of payments, the government plans to borrow $11.6 billion in 2018-19. According to Dr. Ishrat Hussain, Ex-Governor of State Bank of Pakistan and currently Adviser to the Prime Minister, till1980 there was a steady growth rate of 60%, with incomes doubled and poverty reduced from 46 to 18%. Then came the IMF bailouts to sink us.

Today the country faces massive budget and trade deficits. While exports are dwindling, the import bill continues to rise. After debt servicing and defence expenditure, nothing is left for human development. China Pakistan Economic Corridor (CPEC), the projected game changer, is mired in mystery and may have to be re-negotiated for a more favourable share of the bonanza that it promises. The $60 billion Belt and Road initiate is massive for a developing country like Pakistan. If managed efficiently it can be beneficial but if not, it can cause an additional burden.

Energy has been a big challenge which consumes maximum foreign exchange. Import of expensive LNG (Liquefied Natural Gas) has not helped. Indigenous resources including clean use of coal should be seriously considered.

Unfortunately, nation-building has been stalled in the last forty years. Naya Pakistan calls for the major focus on human development. Civilian institutions have to be rebuilt as their misuse and bashing is reportedly coming to an end. The khakis have finally decided to stand behind and not in front of these vital state organs such as the judiciary and Election Commission of Pakistan (ECP). The sectors of Education and Health have been long ignored; even clean drinking water is not freely available to the masses.

Despite tall claims and constitutional guarantees, the literacy rate remains below 60%. After the complete restoration of Article 25-A of the constitution, every child of the age of 5 years should be in school thereby achieving universal primary coverage but it has not happened. There isn’t just a problem with the numbers- even the quality of education has seriously declined. Due to the lack of mentorship in most sectors, the institutional ability to deliver has been effected.

Read more: Imran and the IMF: Pakistan’s bailout dilemma

Agriculture has been the backbone of the economy. While the country has the ability to feed itself, the farmers have not been facilitated and economically they are in bad shape. Research and modern practices have not reached the farmlands. Water scarcity is also knocking on the doors. Instead of turning Pakistan green with flags on this Independence Day, there has been an appeal to plant trees for long-term greenery.

Pakistan is a country of extremes; it has the fastest growing informal sector and slowest expanding formal sector in Asia. On one hand, it shows the resilience of the nation to grow while on the other it signifies the failure of the state. The administrative machinery and public sector need a major overhaul.

The government should be a facilitator not an impediment in the well being of the masses. Pakistanis are one of the highest charity giving nations of the world and perhaps the lowest taxpaying. Again it indicates a serious breach of credibility. The private sector has stepped in but it too needs to be regulated in best public interests, otherwise, it becomes a tool of exploitation.

Business, as usual, will not deliver; out of the box, solutions are required. With his background in corporate governance, the finance minister-in-waiting will have to steer a ship which is in dire straits.

The current foreign exchange (FOREX) reserves stand at $16 billion and dwindling due to a trade deficit. It is time to tighten the belt and lower the import bill while increasing the quantum of exports. Energy has been a big challenge which consumes maximum foreign exchange. Import of expensive LNG (Liquefied Natural Gas) has not helped. Indigenous resources including clean use of coal should be seriously considered. The IPI( Iran, Pakistan, India) pipeline is a viable option. Instead of dollar payments to Iran, a system of barter can be introduced.

Historically speaking, IMF and World Bank loans have not been able to strengthen the economy of any country. In the 20th century, the Chinese model of poverty alleviation stands out. Over 500 million people have been affected. Chairman Mao Tse Tung believed that the best form of capitalism for China is that every Chinese has his own capital. The trickle-down model of the West has not worked. The concentration of wealth in a few hands has become a serious epidemic. Poverty is on the rise worldwide despite the loan packages.

Read more: IMF bailout on the cards for Pakistan’s next government: analysts

Foreign capital influx can help if it is well invested with maximum return to pay it back. Unfortunately, in most developing countries, the loans are misused and squandered mainly because of the inability of the state apparatus to conceive and then implement viable projects. The Orange Line Metro Project is a prime example of this flawed approach. Development funds should be uniformly distributed to avoid the influx of rural population into urban centers like Lahore and Karachi that have grown into the unmanageable metropolis.

With challenges come opportunities, and the government of Pakistan Tehreek-e-Insaf (PTI) comes in with no excess baggage, so it is in a position to introduce major changes to streamline the economy. Business, as usual, will not deliver; out of the box, solutions are required. With his background in corporate governance, the finance minister-in-waiting will have to steer a ship which is in dire straits.

Read more: Trump administration warns IMF against bailout for Pakistan

There is a lot of inertia to stall change. Islamabad is a very slippery wicket where players do not last. As Kaptaan is playing with neutral umpires, he has the opportunity to win the match for the suffering masses of the Islamic Republic of Pakistan by converting it into a welfare state as envisioned by the founding fathers.

Dr. Farid A. Malik is Ex-Chairman, Pakistan Science Foundation. The article was first published in The Nation and has been republished here with the author’s permission. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.

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