The government of Pakistan has come to an agreement with the IMF for a three-year loan programme of $5.3 billion under an Extended Fund Facility, with a further $2 billion to be lent if the IMF Board of Executive Directors approves Pakistan’s request for its level of access to be increased from 348 percent of quota to 500 percent. Though federal Finance Minister Ishaq Dar said at a press briefing with IMF Mission chief Jeffrey Franks in Islamabad on Thursday after the agreement was reached that ‘we have not carried the begging bowl’ he also admitted that ‘there was no option but to request the loan to save Pakistan from defaulting.’ The price of escaping default includes eliminating tax exemptions to broaden the tax base, increasing the power tariff by withdrawing the subsidy in three years, and restructuring and privatizing public sector entities now running at a loss.

The IMF itself had created the need for the loan, with the previous package repayments creating the foreign exchange crisis that has driven the country to the brink of default. That has not stopped it laying down harsh conditionalities for the new package, which was reflected in the rigours of the recent budget. Senator Dar had insisted that it was not designed to mollify the IMF, though Mr Franks told the briefing it had been an important step in the right direction. That direction is to present the IMF Board with a timely completion of actions by those in authority, by September. As Pakistan has experienced before, the IMF conditionalities are harsh and anti-people. Though Pakistan completed a programme under Prime Minister Shaukat Aziz that had more to do with the politics that the IMF enforces, which is a compliance with US wishes. It is noteworthy that the conditionalities do not include a tax on agricultural income, which is the biggest of all exemptions, and which is fiercely protected by members on both Treasury and Opposition benches.

However, the position he built was thrown away by the mismanagement and corruption of the previous government, as a result of which not only did Pakistan reach the brink of default, but it did so just before the US drawdown in Afghanistan makes it want more obedience than ever before. The present government may have campaigned on a plank of independence and national interest, but once in office, it has been behaving like governments of the past in agreeing to impose harsh donor conditionalities on the people, already hard-pressed by the woes that obliged the recourse to the IMF.