A Game of Loans
The International Monetary Fund (IMF) is a corporation headquartered in Washington DC and presently comprises of 189 countries. This organization works globally to facilitate and support countries laboring under the burden of financial instability. Additionally, it also plays a prominent part in facilitating international trade, promoting employment and sustainable economic growth, and eliminating poverty.
Discernible is the veracious fact that the correlation between IMF and Pakistan is not so instantaneous. This bond dates back many years, following the establishment of Pakistan, from which it can be contemplated that financial assistance has been solicited from the IMF in times of economic precariousness. In more recent times, Pakistan locked, as stated by many commentators, a ‘bailout’ deal with the IMF to receive $6 billion over a period of three years. It was formally announced by the incumbent Minister for Finance, Revenue and Economic Affairs, Dr Abdul Hafeez Shaikh, on the state-run channel, PTV, in the following words:
“After months of discussions and negotiations, a staff-level agreement has been reached between Pakistan and the IMF.”
According to an IMF press release, the IMF Mission Chief for Pakistan, Ernesto Ramirez Rigo, further added that,
“The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US $6 billion.”
It is reminded that this is the 13th time since the 1980s that Pakistan has looked up to the IMF for financial reinforcement. The latest financial assistance granted to Pakistan has been claimed to be of paramount significance for the current flimsy economy which is in dire need of revitalization and stabilization. The present devastating state of affairs in relation to the financial resources of the state is due to the colossal trade deficit resulting from the country’s imports exceeding its exports and requiring a huge chunk of foreign exchange spending.
Also apparent is the fact that political instability and financial uncertainty in the market has materially influenced not only international investors but also the domestic ones who are now hesitating to invest and subsidize in Pakistan, thereby restricting the flow of capital in the realm.
Another ancillary aspect adding more burden to the fragile economic circumstances includes the incessant proliferation of interest rates on debts owed by Pakistan.
Scarcity of dollars in our national reserves has also led to the value of the dollar surging in a deviant manner. This has further led to hyper-inflation resulting in repercussions being suffered by ordinary citizens.
Following the IMF deal, the Opposition deprecated the government and demanded accountability for the monumental devaluation of the rupee. Mariyum Aurangzeb, the Pakistan Muslim League-N’s Information Secretary, criticized the government for not involving Parliament in the arrangement with IMF. Senator Sherry Rehman belonging to the Pakistan People’s Party also recently observed the following in a session of the Senate:
“A new wave of price spiral is about to engulf the nation as the government had enslaved itself without any filter to the IMF.”
The loan granted by the IMF is said to be used to pay off debts, raise money for imports and prevent further catastrophic devaluation of the rupee. This may redevelop the interest of foreign capitalists and businesspersons to invest in Pakistan, which would be a constructive move towards the betterment of the economic situation. On the other hand, Shahid Hasan Siddiqui, a Karachi-based economist, while speaking to Anadolu Agency, has said that,
“The basic focus of this programme [in line with previous programmes] is stabilisation now and growth later. But history tells us that at the end of these programmes, Pakistan’s average growth rate remained the lowest in South Asia since 1988.”
While the deliberate clutching of the loan from the IMF may be perceived to solve the current issues of economic variability and instability, such ventures can also be perceived to overburden the state under an acute accumulation of debts. Frequently and customarily looking up to the IMF for financial assistance is also viewed by many as a quotidian move by the government and one that may represent Pakistan as a mediocre and poverty-stricken country across the globe.
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any other organization with which she might be associated.
