The persistence of the Shehbaz coalition in Pakistan has resulted in a stand-by arrangement (SBA) with the IMF, offering relief from the threat of default. The IMF’s conditions are stringent, aimed at ensuring the country’s loan repayment capacity, highlighting its lack of trust in the government. However, these conditions often lead to unpopular economic policies that might cause suffering and hinder growth.
Pakistan borrows from the IMF to repay project loans due to its inability to generate sufficient foreign exchange. Unfortunately, these loans have not translated into significant development, as they were often misappropriated by the ruling elite. Consequently, the country falls into a cycle of borrowing again and converting commercial debt into IMF debt.
While the IMF claims to have no political agenda, it has faced criticism for being used as a tool of foreign policy, especially when the managing director is an ally of the United States. The recent China-Pakistan Economic Corridor (CPEC) has amplified the IMF’s interest in Chinese loans to Pakistan, including restrictions on using IMF loans to service CPEC debt to China.
Despite the challenging terms, the government seeks IMF assistance due to its more favourable conditions compared to the international money market. Lenders hesitate to provide loans to a country on the brink of default, resulting in prohibitively high interest rates. The concept of a Charter of the Economy gains traction, as all major parties have dealt with the IMF and possess no significantly different economic policies. The Charter aims to bring continuity to economic debates and provides boundaries that international financial institutions cannot transgress. It requires commitments from parties to amend the Charter, promoting collaboration.
While the IMF identifies structural reforms, these often remain unimplemented, becoming tools for criticism rather than progress. The Charter of the Economy could address this issue and ensure crucial reforms are implemented.
Pakistan’s reliance on the IMF underscores the need for long-term economic reforms. A Charter of the Economy, involving all major parties and the establishment, could provide the necessary continuity and prevent the political manipulation of economic policies. It is crucial to move beyond short-term solutions and focus on sustainable development to uplift the nation economically.
MUJEEB AI SAMO,
Larkana.