Pakistan and the IMF
By Samuel Baid
If it defaults on its debts like Sri Lanka, Pakistan has already sketched the face of the culprit- the IMF or the International Monetary Fund. The country’s Finance Minister Ishaq Dar said “Geopolitics is behind a halted loan programme so that Pakistan defaults”.
Dar made this statement while addressing a Parliamentary committee on finance and revenue. After the IMF raised objections to Pakistan’s budget for 2023-24 hinting that it (the IMF) may not revive its loan programme. It is said the IMF was not satisfied with budgetary framework for 2023-24 before it finally approved the release.
Dar said the IMF’s demand for a guarantee of $6 billion on external resources was unjustified and delaying the plan apparently suggested a political agenda. He said foreign hostile elements wanted Pakistan to turn into another Sri Lanka by making IMF negotiate with Islamabad. He said in its 2023-24 budget, Pakistan had proposed some tax exemptions, which the IMF didn’t like. But Dar told the IMF that Pakistan was a sovereign country and therefore, could not accept everything from the IMF. He said IMF or no IMF, Pakistan would not default.
But Pakistan understands that without the IMF’s help, it runs a real risk of defaulting on foreign debt repayments. Its foreign exchange reserves have fallen below $3 billion which is enough for three weeks import. This will mount more pressure on rupee which is already as weak as Rs 287 against the dollar.
Dar’s claim that Pakistan is a sovereign country is not to be questioned, but the concern of IMF is very genuine. In Pakistan, a very large number of people avoid giving tax. Those who cannot escape it will now be given tax exemption in the budget for 2023-24. This will mean two losses. One less revenue and two revenue loss plus favour to the upper stratum of the society; widening the gulf between rich and poor.
A few months ago, the IMF had suggested to the Pakistan Government that it should give attention to its poor. Right from 1947, the Government has not bothered about economic potential of the poor people and women. They were not given equal economic opportunities. There are areas in Sindh and Baluchistan, where the poor people live a horrible life, specially during rain and flood. What economic contribution can they make?
It will be a good exercise to study why a country with natural wealth is poor and not poor with not so much of natural wealth. For example, why Pakistan with its natural wealth has become an international basket case?
Therefore before criticising the IMF, United Nations Secretary General Antonio Guterres’ should accept its right to be safe. In a recent statement, he accused the IMF of only benefiting rich countries instead of poor ones. He said the response of the IMF and the World Bank to the Covid-19 pandemic was a glaring failure that left dozens of countries deeply indebted. Mr. Guterres’ criticism of the IMF seemed to echo.
The fact is that Pakistan is not a poor country, it is massively mismanaged country where corruption, money laundering and tax evasion are child’s play for those in powerful position or close to it.
The IMF may not be upto some mischief as Dar alleged. It may be trying to ensure equal economic opportunity for all Pakistanis so that its economy is lifted from the present morals.
Note: The views and opinions expressed in this article are the personal opinion of the author.