IMF conditions never end

Now the IMF is showing that its lending has a political cost

The International Monetary Fund is showing that its packages come with a political cost. First Pakistan fulfilled all its fiscal conditionalities, but got no package, because the IMF said that bilateral aid donors would have to guarantee that they would make the payments. Now, its mission chief in Pakistan has said that the budget coming in June would have to be seen before the programme is resumed. Before that happens, Pakistan has to meet $3.7 billion in repayments this month. Apparently, all of this is happening because Pakistan is untrustworthy, and it is true that Pakistan under the PTI had reneged on commitments it had itself made. However, the real issue seems to be the political component. The IMF is a Bretton Woods institution, and though a supposedly purely economic institution, it also makes sure that its lending goes to countries following the policies mandated by the USA. AT present, the USA wants Pakistan to support it in the Russo-Ukraine conflict. One inflection point will be the vote in the UN General Assembly on the invasion. So far, Pakistan has abstained. The USA would like to change that.

However, Russia is making its own moves. Its heavily discounted oil is going to arrive very soon, with major reductions in fuel prices possible, with optimistic predictions of cuts to about Rs 100 per liter. This alone will prevent Pakistan for US blandishments. Then there is the China factor, with Pakistan unwilling to abandon its close ties with China, especially when the USA is drawing closer to India. Another imponderable factor is that the bilateral allies Pakistan is relying on, apart from Cgina, are US allies. Pakistan can thus expect to be squeezed to make it bend to the US will. The path of independence sounds attractive, but is only possible where there is no financial dependence. Pakistan might note that China and Russia are free of IMF interference because of their economic strength. Russia may have some leverage because of its hydrocarbon resources, but China does not even have that.

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Clearly, the era of geopolitics is not over. It may be true, as it always has been, that economics drives international relations, and Pakistan must adjust to a new world order, but it should not ignore the reality that there are no free lunches, and that lenders, even on onerous terms, ultimately extract their pound of flesh. Pakistan must remember that the IMF wants to keep Pakistan afloat and in the US camp. At the same time, the USA would not like it to free itself of the chains of the multilateral institutions, because it would mean losing an important lever of control.

The Editorial Department of Pakistan Today can be contacted at: [email protected].


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