AT PENPOINT
No sooner had the IMF released the new conditions it had set during its last review that rumours started of moving into another IMF programme after the current Extended Fund Facility expires. That has serious implications for it not only means that the current programme has not worked, but also that the IMF has got its economics wrong.
More dangerous is the possibility that Pakistan is following on the path of Argentina, which has not been able to get off the IMF’s life support system for most of the 21 st century, ever since it defaulted in 2001 on $80 billion in foreign debt, 19 days after the IMF pulled out of the Stand-By Arrangement it had at the time. In 2018, Argentina reached an SBA with the IMF for $50 billion. Only this April, the IMF Board approved an Extended Fund Facility of $20 billion, including $12 billion disbursed at once. Argentina, the second-,ost powerful state after Brazil in Latin America, is bound for survival to the IMF.
The 11 new conditions which the IMF set for Pakistan, bringing to 64 the total, are denied hotly by the federal Finance Ministry to be new at all, merely clarifying existing conditions. They do focus among other things on corruption, though that was in the original programme. . That was perhaps inevitable after the IMF’s diagnostic assessment report, when it ponderously arrived at the conclusion that corruption was rampant, something a babe in arms could have told it. The attempt to uproot corruption is to start with making public the assets declared by public servants (a federal list by year-end, provincial officials to follow by next October). It makes a certain sense to have election candidates make declarations, with electors, but essentially other candidates, challenging misstatements. Here who will challenge except for colleagues and juniors hoping to occupy the slot, or get promoted. If the official is dismissed?
Corruption is not acceptable, for it rots any system. Impunity is how corruption becomes entrenched. However, the approach of the PTI, that of shaming people without a judicial process, is also dangerous in its own way. More relevantly, it provides a convenient cudgel to beat someone over the head with.
It is not as if the West is intrinsically honest. When the East India Company started off, it allowed its employees to trade on their own behalf as well as on the Company’s. This gave rise to the phenomenon of nabobs, Company men who made large fortunes from private trading and cut a dash in London. This was the era when virtually everything was up for sale, including seats in the House of Commons. Nabobs bought their wat into the Commons, and made sure their interests were protected.
The British government wanted to dip its finger in the wealth coming in, and to bring the Company under a Board of Control. One of the tools used was the charge of corruption. Warren Hastings, the first Governor-General, was sacrificed, and accused of immense corruption. In a convoluted fashion, one of the charges against him was the judicial murder of one Nandkumar– who had been accused of forgery for corruption, and who had been hanged. Hastings was acquitted after a lengthy trial, but the Company was brought under government control. It was thus easier to convert India into a Crown colony after the Mutiny, abolishing the Company.
Corruption of the previous regime has been one of the charges used by every Martial Law administrator to justify his takeover. That particular charge has also been used by every President while justifying his dissolution of the National Assembly under the Eighth Amendment.
It is likely that the debt trap is the result of those capitalist policies that the IMF propagates, quite apart from the elite capture it represents. Perhaps the only way out of the debt trap is to construct an economic programme beyond the Washington Consensus, rather than try to work that Consensus to one’s advantage.
It is not that corruption does not exist, but its use for political purposes has taught the wrong lesson: not that corruption must be avoided, but that corruption must be protected by the grabbing of the levers of power.
The use of corruption for political purposes was practised first by the Musharraf regime, then by the PTI. One unfortunate aspect of this is that corruption may well have become a partisan issue, one which the mainstream political parties de-emphasised. The use of the NAB Ordinance against political opponents by the Musharraf regime and then the PTI witnessed a strange twist when Imran Khan ended up in prison on corruption charges, a case of the biter bit, the anti-corruption crusader himself caught with his hand in the till.
Thus it seems that the IMF has switched from sniping at military spending, which was once the low-hanging fruit of the IMF’s criticism of Pakistan’s spending, to an adoption of part of the establishment’s agenda: combating corruption, and trying to break the ban on reducing the provincial share in the National Finance Commission Award. It is interesting that none of the IMF conditions relates to the NFC Award, even though it formed part of the discussions for the first review as well as for the actual granting of the package.
So far, it seems, corruption is only being used as an all-too-familiar trope, of native fecklessness, which will only be relieved by First-World white intervention. Instead of political action, it is being used to suppress an entire nation. It is worth noting that corruption was not a concern during the Cold War, Indeed, so-called development loans were easy to embezzle.
They were made by Washington Consensus international financial institutions like the IMF itself, the World Bank and the Asian Development Bank, and were conditioned on political support for the USA, being meant to embezzle. This meant that the ruling elite was doubly compromised: their personal economic interests were tied to the embezzlement, and the USA had knowledge it could use to keep the particular official on its side.
Should the government be worried about the IMF’s economics? Perhaps it should. This government has obeyed the IMF more than any previous one, However, the economy has not entered a growth phase that would enable the government to oversee the creation of jobs for the youth bulge. Or is the IMF only good for keeping a country in the debt trap? That seems to be what the IMF has done to Argentina, and what it seems to be doing to Pakistan.
Is there any commonality between the two?
Actually, there is, and more than would seem apparent. Argentina supported Pakistan in 1948 at the UN, when it needed help for a Kashmir resolution. Apart from that, both have experienced military rule, both are large countries dwarfed by a neighbour (Brazil for Argentina, India for Pakistan), and both had nuclear weapons programmes. Argentina fought a war against the UK in 1983, after which it began a nuclear weapons programme, which it ended after the military regime gave up power. Pakistan, on the other hand, has been a nuclear power since 1998.
Recourse to the IMF is probable if Pakistan wishes to continue getting access to the world money markets. It should be clear that the IMF economics is not designed to get a country out of its debt trap. The focus is to ensure that it can service its debt.
It is likely that the debt trap is the result of those capitalist policies that the IMF propagates, quite apart from the elite capture it represents. Perhaps the only way out of the debt trap is to construct an economic programme beyond the Washington Consensus, rather than try to work that Consensus to one’s advantage.
