The IMF unveils its real face much earlier than envisaged
M. Fazal Elahi
In my article titled “IMF assistance: more detrimental than beneficial for Pakistan” published in some eminent English dailies of the country, in October 2019, I had cautioned the incumbent government not to get hooked on to International Monetary Fund (IMF) for assistance to meet its dire financial needs.
The reasons I had then quoted for not falling in the trap of the IMF were: (1) Going to the IMF for assistance would mean complete abidance of IMF’s inordinately abrasive terms and conditions by Pakistan (2) IMF is known among its borrowing member countries as a martinet; the borrowing countries have no option but to agree and strictly abide by its extremely harsh terms and conditions set forth for extending loans to them.
I had also lucidly stated in my article referred above that while seeking a bailout package from the IMF let us not be oblivious of the stark reality that more than the primary objective of its creation this international financial organization (IMF) is functioning under immense influence of the powers that be, particularly the United States of America. The US, reportedly, is the largest contributor to the IMF and has 17.68 per cent of voting rights in major decisions of this international lending agency. In view of the foregoing fact, the US wouldn’t find a better opportunity to make Pakistan bend on its knees, and compel it to come to terms with the US not only on the CPEC issue but all other unsettled issues that are crucial to its interest.
I had mentioned then, the US wouldn’t miss any opportunity to tighten the noose around Pakistan’s neck through every possible means. I had also drawn the attention of the incumbent government that we should also bear in mind the condescending and threatening statements of July 31, 2019 of the United States’ Secretary of State Mike Pompeo, and the premeditated utterance of the spokesperson of the US State Department, Heather Nauert vis-à-vis potential IMF assistance to Pakistan.
The IMF, as I had predicted, has now opened up brashly. In fact, it has shown its real face much earlier than one could envisage. As reported in some leading dailies of the country on February 14, 2020, the IMF delegation persisted on ‘immediate measures’ for reducing the revenue-expenditure gap and fixing the cash bleeding energy sector. It disagreed to grant Pakistan’s humble request to further revise the stringent revenue target (Rs. 5, 238 billion) it has set forth for Pakistan for the ongoing fiscal year.
As reported by an eminent English daily of the country, official sources confirmed to them that the Federal Board of Revenue (FBR) desired a further reduction in its revised target of Rs. 5, 238 billion but the IMF preferred to see the plan aimed at removing distortions and expanding narrowed tax base on a permanent basis. The IMF, it is believed, insisted that, if the need arises, the government must take measures to correct the situation halfway instead of waiting for the worsening of the situation till next fiscal year.
On the issue of revenue generation the daily under reference further reported that a couple of months ago the Fund’s Executive Board allowed FBR to reduce the target from Rs. 5.5 trillion to Rs. 5.238 trillion. If the Fund grants Pakistan’s request for further reduction in the revenue generation target question will be raised on IMF team’s credibility that within just a couple of months their projections related to FBR revenues have been proven wrong. The IMF certainly wouldn’t like to take this blame on itself. On the other hand, if FBR’s revised target remains intact at Rs. 5, 238 billion, it, as known to all and sundry, would be impossible for FBR to achieve. So, it is evident that both sides are caught in a Catch 22 situation.
All the issues enunciated above are unambiguously crucial and challenging for the incumbent Pakistan government. However, the most perturbing and inconceivable posture taken by the IMF is its blatantly asking Pakistan “to reduce its trade and commerce reliance on Beijing”, and look for other international options by signing free trade agreements with other countries too. I knew this was coming, and it has finally come. In fact, it has come much too earlier than one had expected. This issue, if looked at critically, exposes IMF’s intent to give a serious blow to the ongoing multi-billion dollar Pak-China mega CPEC project; a project that has been forecast to bring phenomenal economic boom not only to Pakistan but to the entire region.
Those who keep a close eye on international politics are fully aware of the fact that particularly the US and its steadfast cohort India have never been able to digest the very idea of this gargantuan joint venture project between Pakistan and its time-tested friend China, right from its inception. They have been covertly building up strategies to pressurize Pakistan through different modes to massively, if not entirely, cut down on this vitally important development project. The fact of the matter is the detractors of Pakistan would have been much happier if it surrendered this project out-and-out.
Exchange of pleasantries and bestowing flamboyant protocols by heads of governments to each other is always reciprocal, and are very much part of standard universal diplomatic norms. Let us, therefore, not get carried away by the pleasantries exchanged and the outwardly amazing offer the US President Donald Trump had made during his meetings with premier Imran khan. During his first meeting held at the White House in Washington on July 22, 2019 he offered to mediate on the issue of IOK between India and Pakistan, and in the second encounter held on the sidelines of the World Economic Forum (WEC) in Davos, Switzerland on January 21, 2020, he renewed this offer. Unfortunately, however, nothing tangible has come out of these offers so far. Contrary to this, the Indian government, through a presidential decree issued on August 5, brazenly revoked Article 370 of India’s constitution that guaranteed special rights to the Muslim-majority state, including the right to its own constitution and autonomy to make laws on all matters except defence, communications and foreign affairs. This measure was termed by the civilized world as the most far-reaching political move on the disputed region in nearly 70 years.
In my previous article (of October 2019), referred above, I had also explicitly cautioned the incumbent government that IMF’s stance vis-à-vis grant of loan to Pakistan would predictably be extremely harsh. It would be so, for of two reasons: 1. Because of its stringent pecuniary policies and 2. Because of its covert ‘guided’ plan to gag Pakistan’s development projects, particularly the CPEC. Much to the detriment of the people of this country, Pakistan, perhaps due to its critical financial compulsions, had to go to the IMF and seek its monetary assistance. The result is manifestly clear. Praising the economic performance of the incumbent government by the visiting IMF team, perhaps as a measure to make room for itself to impose yet more repressive policies on Pakistan, make Pakistan bend on its knees, and compel it to take economic measures that, for sure, would have adverse impact on the livelihoods of the people in particular and the economy of the country in general.
The IMF team came and left without signing the staff level agreement which, if inked, would have led to the release of the third tranche of $452 million, consented by IMF to be paid to Pakistan against the $6 billion Extended Fund Facility Program. Presumably, it happened so owing to the government’s inability to take ‘prior actions’ by placing a viable fiscal adjustment plan, hiking gas and power tariffs and ensuring Chinese loans rollover. According to media reports, Pakistan has categorically stated that it would not increase the gas and power tariffs whatever may be the consequences. What would be the ramifications of this decision vis-à-vis IMF demands wouldn’t be difficult to gauge. Whatsoever may be the end result of this mutually fractious tug-of-war between the international lending agency and the government of Pakistan, it would be pretty easy to predict that it is going to make things worse for Pakistan with the passage of time. It must be clearly understood by those at the helm of governance in the country that the IMF will do whatever within its reach to make Pakistan buckle under its pressure. It would emphatically do so, to attain the covert tasks mandated to it by its sponsors.