Role of IMF & US in the Economic and Political Crisis of Pakistan
From its inception till date IMF bailed out Pakistan 22 times . It is often hesitant to approach IMF because of IMF ’ s vicious conditionalities and structural adjustments but there is no other go for it . Nevertheless it did not withdraw the entire amount originally agreed upon in the earlier bailouts to save itself from the conditionalities and the popular anger that it creates . So almost 19 of these IMF programs have not been completed . Also had it not for the geo-political interests of the US it would have been reduced to dust for not stringently implementing these policies .
Tied to US Imperialism
Since 2001 , Pakistan has been the beneficiary of the US Coalition Support Fund ( CSF ). The CSF reimburses allies the costs incurred on war on terrorism and for allowing the usage of its network infrastructure ( e . g ., ports , railways , roads , airspace ) for US military . Every year Pakistan gets around $ 1 billion in CSF along with $ 335 million in humanitarian assistance . Due to inaction on the part of Pakistan the United States has recently cut another $ 300 million from the CSF . The withdrawal of US from Afghanistan has reduced Pak ’ s strategic importance and its affinity to China angered US resulting in the suspension of all security assistance to Pakistan , whether it is international military education and training , foreign military financing , or the CSF in the year 2018 , the year Imran Khan got to power . Imran Khan aligned a step further with China . He recognised the Taliban government along with China . He publicly refused to provide bases to Washington for operations in Afghanistan . This has resulted in drastic reduction in security assistance from US and delay in the IMF bailout package approved in 2019 . So he not only inherited fiscal deficit , CAD & BOP crisis from previous governments , but also the wrath of the US . 10
IMF & Neo liberal Policies
Pakistan ’ s tryst with IMF started in 1958 . Instead of alleviating it from its woes IMF kept it in perpetual economic crisis and debts . On an average it suffers fiscal deficit , current account deficit , and Balance of Payments crisis and had to beg IMF every 4 years and it is no coincidence that almost every 3-4 years government destabilizes and new govt . comes .
IMF imposes neoliberal policies on countries that ask for loans . Pakistan is no exception . It has to cut subsidies , expand tax base , privatise state enterprises , let the rupee to ‘ float ’ – driven by markets and facilitate FDIs . The reduction in subsidies on agriculture , fuel , electricity leads to inflation . The IMF pill for food inflation is food imports . One of the most enforced neo liberal policy of IMF is that a country has to stop producing anything that is being produced at cheaper rates elsewhere , instead they have to focus on other products and import these cheaper products . This policy is meant to reduce a self-sufficient country to a dependent country .
IMF ’ s regular solutions for Pakistan ’ s fiscal deficit [ excess of government expenditure over its revenues ] is to remove subsidies & privatize state enterprises to reduce government expenditure ; increase taxes and utility bills like electricity to increase revenues ; and for current account deficit ( excess of spending on imports over exports ) its solution is FDIs . But Pak ’ s experience proves FDIs drained its wealth instead of generating it . Let ’ s delve into its recent past . IMF and the Political Crisis Since 2007 , the completion of a particular government ’ s term coincided with the need for financial support from IMF . No Conspiracy ? In 2008 IMF loaned $ 7.6 billion to the new PM Yousaf Raza Gillani . After the collapse of this government in 2012 ,
IMF negotiated in 2013 with the interim government of ( ex Chief Justice ) Mir Hazar Khan Khoso . Later the new government of Nawaz Shariff committed itself to this deal with the promise of agri taxes and got $ 6.6 billion loan .
In 2018-2019 , the new PM Imran Khan reached out to Saudi Arabia , the United Arab Emirates ( UAE ), and China for help and got $ 3billion , $ 3 billion and $ 3.5 billion respectively . But he couldn ’ t bring any change as neoliberal policies are already in place for years . Thus in 2019 , he had to approach IMF and agree to its policies of increasing tax base , increasing power tariffs , privatising Pakistan Airlines and its Steel industries . But he didn ’ t implement those unpopular schemes immediately so IMF delayed its funds and complicated the crisis . Finally Khan succumbed . He had to replace his State Bank Governor with Reza Baqir , who is working for IMF , replace the Chairman of Federal Board of Revenue [ the tax collection body ], and his Ministry of Finance . He even announced increase in electricity slabs . But before things could settle the economic crisis lead to political turmoil and he himself lost his post .
The new Prime Minister and his team immediately committed to IMF , approved electricity bill hike of Rs . 4.8 / unit [ Before this hike the unit rate varied between Rs . 2-2.4 ]. They announced that they will push for privatisation of Pakistan Steel Mills and Pakistan International Airlines .
Even though IMF has bailed out Pakistan 22 times , and enforced neoliberal policies its situation has not improved but deteriorated . It turned from a food exporter to a food importer , more and more towns are facing electricity blackouts . Every few years Pakistan ’ s foreign currency reserves fell to a level equivalent to only two month imports [ every year the imports keep rising ].
Class Struggle