IMF bailout: the coming medicine for Pakistan?

October 27, 2008

Is the International Monetary Fund going to force Pakistan to swallow its classic bitter pill – which to some is worse than the disease – as a price of rescuing it from economic meltdown?

IMF Managing Director Dominique Strauss-Kahn has said loans to countries hit by the global financial turmoil would be faster, and with fewer conditions, than in the past. Conditions for lending should be defined by what is needed for the programme and should not be an “attempt to fix the world”, the IMF Survey magazine quotes him as telling staff.

However, on the ground, and especially in Pakistan, there is feverish speculation about the price the nation of 160 million people could be asked to pay in return for a loan to stave off financial collapse. 

 

 

Pakistan’s The News, citing an internal document, sets out what it said were extremely tough conditions

1)      a 30 percent cut in the defence budget between 2009 and 2020

2)      reduce government pensionable jobs from 350,000 to 120,000

3)      a new taxation structure to raise revenues including tax on wheat production and other crops

4)      Revenue collection reports/analyses to be submitted each quarter to the IMF down to the provincial level

5)      Six IMF directors and two from the World Bank to monitor preparation of the federal budget

Are these conditions virtually amounting to an “economic martial law” feasible for a country that is the central front of the war on Islamist militancy? Can it really bear the cost ?

And is this why Pakistan is balking at the prospect of going to the IMF even at this stage when it needs $3 billion to $ 4 billion in the next 30 days to stabilize the economy?  Islamabad said it had not yet formally made a request to the IMF, contradicting Strauss-Khan’s statement that an approach had been made and that discussions would begin.

This led some to think that Islamabad was still hoping that its friends such as China, Saudi Arabia or perhaps the Americans would help put together the immediate cash that could hold off going to the IMF for some more time.

Pakistani Defence Minister Ahmad Mukhtar, who told The News that the defence forces were already facing massive financial constraints following the devaluation of the rupee against the dollar, has already rejected the reported proposal of a 30 percent cut in defence spending.

 

 And the Dawn newspaper in a report from Washington quotes an unnamed Pakistani diplomat as saying that the Pakistan Army couldn’t be expected to fight al Qaeda and the Taliban if its funding were to be cut by a third. “There have been general suggestions of reductions in expenses but not a word about the military,” he says.

 The United States, though, he says is calling for Pakistan to “refocus its military strategy” to fighting militants instead of devoting resources to confronting India as has been its traditional military posture..

Comments

I am from Pakistan. These conditions of the IMF scare me to death, these are very tough times for Pakistan. I was hoping REAL friends of Pakistan like China and KSA would help Pakistan fight off this economic calamity, but now the signs are not looking strong and after just reading an article from Gulf times that PM Gillani has approved IMF bailout package, there are troublesome times ahead for Pakistan. The thing I don’t understand is why USA isn’t helping Pakistan out whereas Pakistan is fighting America’s war against terrorism. It is all so complicated. May the best happen in Pakistan’s interest.

Posted by spurdozer | Report as abusive
 

isn’t it true that during the “IMF loan days” rate of decrease of poverty in India was at it’s lowest, actually it was flat?some people even say that poverty actually increased.so, best of luck for pakistan.

Posted by unknown indian | Report as abusive
 

give us ben laden first than you get the money or ask him for help

Posted by mike | Report as abusive
 

Great article Mr. Miglani! but I have my doubtsI wish it had been posted by someone other than you.

Posted by Patriot | Report as abusive
 

The problem for Pakistan started after joining/helping Srilankan armed forces (they are demons). If they stop or kick those SOB’s out, Pakistan will prosper.

 

Actually, Pakistani Military should be reduced to70 percent in which the equal representation shouldbe given to the ethnic groups i.e. Baluchs, Sindhis,Pashtuns, Panjabis and Gilgit-baltistanis. Police andbeurocrats should be cut by 40percent. To face thecurrent financial crisis in Pakistan….The “businessempire” of Pakistani military should be privatised andmilitary industries and their bussiness should besold to bring money.

Posted by Khan Jan Baluch | Report as abusive
 

Pakistan’s number one problem is corruption. Their police, judiciary, provincial and local governments, so-called elected members are all corrupt to core. Just ask these elected government representatives where they got money to fund their election? I bet you they are already using their ill-gotten power to cover their money and lot more. Political parties are organized to serve a few of their own.Unless there is accountability in all sector of government, you can throw any money there and it will be swallowed leaving no trace. Just ask Mr. Ten Percent, President and previous governments. Have they ever put a hard day of work in their life? They are all the same, CORRUPT TO THE CORE.Ahmed, Los Angeles

Posted by Ahmed | Report as abusive
 

its only gonna delay the inevitable bankrupcy and then hopefully a radical reapraisal of what the country stands for and a brand new post feudal economic structure.

Posted by Shantanu Chatterjee | Report as abusive
 

I think the best option would be to just default on the international loan obligations or to move our forces back from the Afghan border. Atleast defaulting would give us a chance to make a fresh start. For pulling back the forces, why should we continue to do the dirty work of the Americans when we have to face criticism and ADVICE from every tom and harry in USA on how to fight the war and what to do (even some suggestions on this comment section). Hey where were these same intellectuals when the USA banks were lending to sub prime customers. We have again, with US blessings, being forced a new President. If none of the countries think we are worth as a friend why waste our time?

 

Pakistan is just one of many third countries which are going to need a bailout………who is going to bailout the IMF when they run out of money ?

 

It is amazing how people of Pak did not see this coming. People are quick to blame corrupted politicians but when the same politicians said that Kashmir is the main issue of the nation, people supported them.I believe $4 billion military budget is a lot for a country like Pak. On top of it provoking military attitudes added little more burden on bleeding economy.There are very few countries like Bharat (India) that came out of IMF death trap. Pak might have resources to recover but it can never recover from terrorism that it has created to counter the neighbors.I do not know how many Pakistanis know that their government sold thousands of acres of agriculture land to Saudis to clear debts. I guess it is time for Bharat to bid for Punjab to begin with.

Posted by Ravi | Report as abusive
 

Pakistan is already being called as a failed state. Something urgent needs to be done by the civilian government to prevent this mishap. Have a look at what this Indian site says.http://www.indohistory.com/history_ of_pakistan.html

Posted by Imran Raza Khan | Report as abusive
 

It is not only American war on terror it is Pakistan war.If Pakistan does not fight war.Taliban s will occupy FATA region of Pakistan which they have done to some extent even when Pakistan is fighting war.I do not understand why Pakistan is thinking it is American war.For ur information Taliban occupied and control swat valley now

Posted by mahi | Report as abusive
 

To read more about the develpment in pakistan read this post athttp://real-politique.blogspot.com/200 9/01/pakista ns-actual-economy-is-in-good.html

 

To read more about the develpment in pakistan read this post athttp://real-politique.blogspot.com/200 9/01/pakistans-actual-economy-is-in-good .html

 

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