Is IMF really a saviour?

 

In April 2022, we all witnessed how Imran Khan’s government was toppled by opposition parties through a no confidence motion. Since then, a political turmoil and an economic havoc has continued to strangle an already struggling Pakistan. From the skyrocketing dollar exchange rates to record inflation figures of around 40%, the country kept looking towards IMF for a bailout package. Economic devastation on one hand, and political chaos on the other hand made Pakistan really feeble. 

However, as we say there is always a light at the end of the tunnel; thus, finally Pakistan reached a staff level agreement with IMF in July 2023 for a bailout package. But is it seriously a light or just an apparent glimmer of hope which is eventually going to fade, abandoning us in the darkness? The unsustainable budget presented by the sitting government in June 2023 before the deal with IMF invited its fair share of criticism from the economic analysts because this budget can rightly be referred with the problem of unfunded liability. The government laid down an expenditure plan, but no one was certain about how Pakistan would have income to fund these programs.

Pakistan's History with IMF

In these 75 years, Pakistan has been to IMF 23 times, and yet our economy is ailing. Since our independence in 1947 we have been struggling morally, economically and politically.  IMF does not just provide loans but once it lends you the money, its interference in your country increases. It lays  down strict economic conditions regarding collection of tax revenue, subsidies and other expenditures because it needs to ensure that interest and loan payments are smoothly reimbursed. IMF lays down a list of economic policies that the low-income countries need to follow to procure the loan, and these policies were one of the biggest hurdles in Pakistan’s way. In one way, this manner of accountability ensures that the funds are spent at right places for public welfare, but implementing these polices and abiding by these strict conditions is not always a piece of cake especially in a country like Pakistan where almost half of the population is living below the poverty line.

IMF is not always a friendly option, but rather like an old, grumpy landlord who might lend you some money but with such strict conditions that somehow you just keep going back to him. Tightening monetary and fiscal policies along with implementation of market-based exchange rates are an example of stern IMF conditions for loans, but these policies have a detrimental impact on Pakistan’s economy. Floating Exchange rates tend to devalue the rupees which makes imports really expensive thus the price pf imported raw material increases and this inflationary effect is felt across the economy and continues like a vicious cycle.

So, what is the Solution?

Thus, Pakistan is trapped in the cycle if IMF while also struggling with continuous debt trap. IMF has become a new and proactive actor in foreign policy decision making. The governments should not focus on getting loans but rather devise a comprehensive plan for appropriate expenditure and revenue for the country so it does not have to rely on foreign bodies to rescue Pakistan from the sinking ship of its economy.