As expected, the PTI government succeeded in passing both the Finance (Supplementary) Bill and the State Bank of Pakistan (Amendment) Bill 2021 through the National Assembly. The opposition made fiery speeches and brandished slogans but were not strong enough to prevent the passage of these controversial bills.
Both bills were passed to meet IMF conditions to ensure that Pakistan’s sixth review of the $6 billion Expanded Financing Facility will be approved by the IMF’s Executive Board at its meeting scheduled for 28 January.
The government reached an agreement with the IMF for a $6 billion rescue package in 2019. The IMF program remained suspended for some time during the Covid-19 pandemic, after which Pakistan negotiated the restoration of the program.
The IMF imposed very harsh conditions to release the next tranche. For increased income on IMF terms, the people of Pakistan will pay in the form of price hikes and increased cost of living. The government will continue to raise the prices of petrol, electricity and gas, as well as impose more indirect taxes. As a result, people will continue to suffer from poverty, unemployment and rising inflation.
Each government claimed – after signing the loan program – that it would be the last IMF program. The current government also made a similar request in 2019. Similarly, every IMF loan comes with conditions attached. These conditions are called “structural adjustment programs” (SAP). Whenever SAPs are imposed in Pakistan, the lives of the poor, workers, peasants, farmers and small traders become more difficult.
The IMF’s austerity policy of taxing ordinary people and cutting subsidies for basic items can only deepen poverty. It will also shrink the consumer market and hurt the economy. It is a political approach that has already failed and will fail again. What we need is a policy of public gain and economic expansion.
The purpose of these conditionalities is simply to ensure that the borrower repays the loans it has obtained from the IMF, a purpose which is clearly stated on the IMF’s website: “When a country borrows from the IMF, its government undertakes to adjust its economic policies to overcome the problems that led it to seek financial assistance.
“These policy adjustments are conditions for IMF loans and serve to ensure that the country will be able to repay the IMF. This conditionality system is designed to promote national ownership of strong and effective policies.
The experience of IMF programs has shown us that the ruling class simply shifts the economic burden of IMF conditionalities onto the people. It sets the conditions that affect the poor sections of the population and the middle class. But he resists conditions that could harm elite interests.
The IMF, like other imperialist international financial institutions, works within the framework of the dominant capitalist ideology. And since the 1980s, the most dominant capitalist ideology has been neoliberalism. It is therefore natural that the prescriptions and solutions of the IMF revolve around neoliberal and free market economic policies.
The question here is: how many IMF programs do we need before we realize that their short-sighted prescriptions won’t solve any of our fundamental economic problems? It is a common misconception that an IMF program is necessary to solve our economic problems.
Our ruling elite prefers to return to the IMF after a few years instead of solving the fundamental problems of the economy. In fact, the Pakistani ruling class has no vision or national plan for the economic development of the country. We hardly have a concrete action plan on industrialization and how to modernize agriculture. We must develop another path of economic development to end our dependence on the IMF and other external sources.
Unless we prepare a very well thought out strategy to develop our economy with a clear objective of ending poverty, unemployment and hunger, no matter who is in government, they will continue to look to the IMF, the World Bank and others. And every future government will continue to accuse the previous one of hoarding more loans.
When the IMF started imposing conditionalities on developing countries in the 1980s, the main objective was to reduce the debt burden of these countries. But after four decades of structural adjustment programs, the debts of developing countries have reached new heights. Now the IMF is forcing these countries to allocate more resources to repay existing loans and many countries are getting more loans to repay old loans and interest.
Despite nearly four decades of SAPs, many developing countries have not been able to pull themselves out of massive debt. SAPs have failed to help a single country achieve economic stability and growth without increasing unemployment, poverty, inequality, exploitation and repression.
IMF prescriptions, however, have superbly served the interests of big business, investors and the capitalist class, providing them with new opportunities to exploit workers and natural resources.
Generally, neoliberal economists and the IMF describe neoliberal free market reforms as necessary measures aimed at reducing fiscal and fiscal deficits, stabilizing the economy, and improving macroeconomic indicators. But in reality, the most important aspect of the proposed measures and policies is to ensure that a country continues to repay old loans owed to commercial banks, governments, the IMF and the World Bank.
The author is a freelance journalist.