The IMF Quagmire

Pakistan has been dependant on foreign aid and loans since decades now and the increasing debt burden never seems to end. This dependence began during Ayub era when Pakistan started its first five years plan with US assistance. Since then taking loans by successive governments on the premise of paying import bills and debt servicing has become more like a tradition than a necessity.

The situation is worsened by incompetent and corrupt government officials. On one hand the people of Pakistan are burdened with more loans of billions of dollars at high interest rates while our leaders spend this money on foreign trips. Pakistan total foreign debt stands today in excess of 40 billion dollars and the further government borrowings especially from IMF are more than likely to continue.

IMF and World Bank are the principle institution affiliated with UN to monitor international monetary system. These institutions mainly give loans to developing countries for development, restructuring and maintaining balance of payments.

When discussing IMF it is also important to discuss the conditions that come along with the loans. These conditions are supposed to be designed to help these countries to repay the loan but the reality seems to be very different. On one hand IMF representatives say that these conditions and ‘targets’ must be met in order to be eligible for further loans but in case of Pakistan since 1990’s we never seem to be fulfilling these conditions and yet the loans keep on coming.

The conditions set by IMF in no way seem to help Pakistan in any way and would only lead to reduced economic growth, deepen and prolong the ongoing financial crisis and not to mention further crush the poor segments of the society. I would like to ask the IMF experts that how would increase in oil prices, increasing interests rates and elimination of subsidies given to already fledging segments of the economy can induce growth, control inflation and help elevate the economic woes of the country. All these measures have only made the situation worse for the people of Pakistan and now even the formally middle class people cannot afford a decent lifestyle.

Moreover, when the topic of IMF comes up its seems appropriate to consider the role of its largest donor i.e. USA in the decisions made by IMF and the influence of US interests in the receiving countries. No country can be truly sovereign as long as its economy is supported by loans from foreign powers. The US backing and the consistency of IMF policies that further the interests of USA and its allies in this region are not a hidden secret. The IMF representatives claim it to be an independent organization that is free of foreign links and does not cater to interests of any country. That is supposed to be true for UNO as well but how can an organization in which all members are not treated equally and the major powers have a mechanism of suppressing the voice of weaker nations through the right of veto be truly unbiased and just.

The total debt of Pakistan has been consistently increasing since 1950’s, even during the Zia era. The only time when this vicious cycle of debt came somewhat under control and IMF debt began to decline was in 2005-2006 during the Musharaf regime, not because of the US aid but due to heavy influx of FDI and real growth induced by investor friendly policies.

If Pakistan is ever to become a prosperous country and get out of this quagmire it has only to improve law and order situation, restore investors interest and eliminate government spending on unnecessary activities and luxuries.