What's new

Has IMF failed Pakistan?

A frequent criticism levelled at IMF has been that its structural adjustment programmes (not just Pak) do not address the basic weaknesses of the economy. Including issues pertaining to elite capture and defense expenditure. What do the learned folks here say? @Joe Shearer @niaz @RiazHaq @Burger_King @VCheng @Meengla


PAKISTAN stands on the brink of default even as it remains engaged with the IMF at the tail end of a three-year programme. While the country’s economic woes are rooted in its own inept policies, IMF has escaped scrutiny of its stabilisation programmes that have failed to put Pakistan on a sustainable path in 22 attempts and certainly needing another programme immediately after this one concludes.

The journey to the brink has been a long one. Throughout the development experience of Pakistan, irresponsible government expenditures led to chronic fiscal deficits, mounting debt and rising interest payments, contributing to excessive domestic demand spilling into external imbalances and loss of reserves. With scant attention to competitiveness, export performance remained weak. Hence, Pakistan experienced persistent foreign exchange crises, forcing the country to seek IMF programmes. Each time, IMF programmes built reserves with borrowed funds, paying previous debts with new loans and arranging financing for foreign exchange shortfalls from various sources. Programmes were approved if creditors could be repaid, not necessarily if Pakistan would be able to stand on its feet.

But inevitably, crises re-emerged soon after the programmes ended because the fundamental issue of increasing foreign exchange earnings for import needs remained unaddressed or aggravated. The programmes failed to recognise that competitiveness is more than the real effective exchange rate in the post-WTO trading world.

Further, in its narrow focus on reducing fiscal imbalances through revenue measures of every kind, Fund programmes paid little heed to the impact of tax measures on investment, resource allocation, economic activity, export promotion and income distribution. As a result, exports remained stagnant, investment rates low and SMEs collapsed in recent years with rampant unemployment. Increasing allocations for income support programmes is neither sustainable nor a substitute for policies to support the robust growth of SMEs and agriculture.

During the current 22nd programme, Pakistan has largely followed the IMF stabilisation programme but like many democratic governments living and spending in the present while ignoring the medium-term consequences of accumulating expensive debt, both governments during the programme period failed to contain expenditures, which exceed 20 per cent of GDP.

With a blind eye towards expenditure growth, the IMF insisted on complex tax measures, ignoring their impact on economic activity and resource allocation to the detriment of growth and competitiveness. Consequently, as governments failed to achieve revenue targets, the IMF forced further stifling tax measures. Growth has slumped below 2pc, exports are declining further from a low level, aggravating the foreign exchange crisis, and inflation has steadily increased from single digits to a historical high of 40pc.

IMF’s dogmatic reliance on higher interest rates to contain inflation and attracting capital inflows to build reserves has proved unsuccessful, because private-sector spending in Pakistan, unlike in more developed economies, isn’t driven by credit, while short-term inflows are unstable for Pakistan, with long-term external liabilities.

Also, high interest rates have crippled industry and increased the burden on the budget; claiming Rs5.2 trillion, over 60pc of all tax revenues. While globally, post-2008 financial crisis, countries have pursued financial repression, keeping interest rates low in response to debt accumulation, IMF has prescribed ever-increasing interest rates in Pakistan, which have risen from 11pc to 20pc over three years, further contributing to increased public debt to over 80pc of GDP.

Despite high interest rates, inflation has steadily risen, raising the cost of doing business, and dampened investment and exports. The IMF prescription to protect interest incomes of banks and creditors from the erosion of inflation has rewarded the rich but failed to protect the poor from the burden of inflation. The most recent increase in interest rates of 300 basis points to 20pc has drained Rs600 billion from budgetary resources that the Fund prescribes to be offset by an increase in sales tax, a burden borne by the poor.

Even if Pakistan reaches an agreement with the IMF to avoid an imminent default before June 2023, the economic crisis would have been postponed, not overcome. And this would have been achieved through severe import controls that have left thousands of containers stranded in ports, closed down industry and reduced exports, besides creating shortages of essential medicines and food items. Looking ahead, Pakistan will need another IMF programme in July, but it must be a stronger homegrown adjustment programme or restructure its debt.

Regards
Pakistanis failed themselves.. imf owes nothing to pakistan… if pakistan wants a loan they have to get on their knees again smh.
Pak army needs to be dismantled… no point of of this army it failed in everything
 
I see many analysts on Pak TV saying that IMF is a international Sazish against Pakistan when ever it asks for tightening polices,increase tax collection or increasing rates. But, is not fair for banks to ask the borrowers to set the finances right inorder to pay them back ?
Also,its Pakistan that goes to IMF and not other way.To stops the Sazish,Paksitan should not go to IMF
unless Pakistan starts acting on economic reforms, IMF run will be perpetual as all govts are worried only about the immediate results in elections and not for long term implications

IMF can help Pakistan by doing the following:

1. Chartering a cruise ship and docking it in Karachi

2. Forcing on board, senior leaders of PPP, PML, MQM as well as senior army high command

3. Head towards Guantanamo

4. Dock in Guantanamo and force people on the ship to disembark

5. Leave them there for twenty years.

Everything else is akin to rearranging deckchairs on Titanic
It is delusional to think that corruption is the culprit of all problems.Corruption exists in some form or another in every country of the world
If you hang all the corrupt leaders,new set will emerge
There are countries in the world that have more corruption that Pakistan,but developed significantly

Malaysia,Philippines,Indonesia ,India and even China has more corruption than Pakistan !
 
My views on all of this are based on common sense. When you borrow from any bank /entity or a person, they would want to know as to how and when you are going to pay it back.
IMF is a ”Lender” not a charity. In order to ensure that Pakistan would be eventually solvent enough to pay IMF back; IMF imposes certain conditions. It is therefore unfair to say that IMF has failed Pakistan or is the causes of oue economic ills. Pakisatn has been spending more than her income for the last 70 years that is why Pakistan has asked IMF for loan more than 20 times since 1950.

US Aid during the cold war, Soviet invasion of Afghanistan and after 9/11 provided funds to keep Pakistan her head above water but now that it is dried up, Pakistan is on verge of insolvency. Even if Pakistan is saved temperorily through the IMF help, there is no alternative but to learn to live within her means. This would mean increasing the taxes, increasing the tax base and an end to the subsidies of all kinds even if it causes the temondous hardship to the common man.
 
My views on all of this are based on common sense. When you borrow from any bank /entity or a person, they would want to know as to how and when you are going to pay it back.
IMF is a ”Lender” not a charity. In order to ensure that Pakistan would be eventually solvent enough to pay IMF back; IMF imposes certain conditions. It is therefore unfair to say that IMF has failed Pakistan or is the causes of oue economic ills. Pakisatn has been spending more than her income for the last 70 years that is why Pakistan has asked IMF for loan more than 20 times since 1950.

US Aid during the cold war, Soviet invasion of Afghanistan and after 9/11 provided funds to keep Pakistan her head above water but now that it is dried up, Pakistan is on verge of insolvency. Even if Pakistan is saved temperorily through the IMF help, there is no alternative but to learn to live within her means. This would mean increasing the taxes, increasing the tax base and an end to the subsidies of all kinds even if it causes the temondous hardship to the common man.
answer is RIBA war with ALLAH and PROPHET the sin is in 60 parts lowest one is having sex with you own mother, so curse of ALLAH and PROPHET is on all Pakistani army and government.
 
US Aid during the cold war, Soviet invasion of Afghanistan and after 9/11 provided funds to keep Pakistan her head above water but now that it is dried up, Pakistan is on verge of insolvency.

I was just viewing a few clips yesterday, one of them being of Dr Abid Sulehri of SDPI. He mentioned this very same thing, that Pakistan for too long has viewed the WoT funds and other such sources as a perennial cash source.

Once US got out of Afghanistan, the WoT funds dried up, and so did other such funds under the garb of anti-terror financing, a major foreign inflow source dried up.

Now I don't have any figures to back up this claim, but it does seem logical.
 
IMF does not provide Economic policy framework of a borrowing country . It's not their domain and they do not have capacity for this. The countries are supposed to formulate the solutions themselves. IMF is only interested in balancing the books. That's why they insist on more taxation. If Pakistan can not find a team of capable Economic experts, how is IMF to be blamed?
 
Pakistan's economic stability has been a topic of concern for many years now, and the mismanagement of the PMLN government under Ishaq Dar's leadership has only worsened the situation. In just two months between December and February, Pakistan's debt has increased by over approx 3 billion dollars, and this has been attributed to Dar's mismanagement towards the IMF. This is a clear indication of the damage that can be done by poor economic policies and lack of credibility.

The PDM Govt made numerous promises of improving the economy, but the lack of trust in the administration has led to China stopping all projects in Pakistan. This, combined with the absence of clear economic or financial policies and just 1.5 years of tenure, has made any business or lending money to the government a risky venture. The Pakistani military establishment has also made nonsensical remarks against China in a defense Conf, further destroying Chinese trust.

In contrast, under Khan's leadership, Pakistan's exports have increased to a record high of 30+ billion covering various sectors including IT, Agri, large and small scale etc. The credit rating of Pakistan was highest in PTI, and this has been corroborated by the WB and IMF. Despite the challenges of the global pandemic, Khan has worked hard to boost the country's economic activity and dynamics, making it clear that loans from international banks or IMF or WB are fine as long as they are used to strengthen the economy and expand exports and overall businesses.

The FBR has been able to collect the highest amount of tax during PTI's tenure, despite being around for two decades. Similarly, NAB has only collected the highest amount of money during PTI's tenure. These figures remain unchallenged, even by Mufta or anyone else.

As living in the West, I understand that 'welfare states' function on tax revenue, with citizens paying up to 25-40% in taxes. IMF & WB have been advocating for economic expansion and taxation in Pakistan, but PMLN's lack of credibility and past corruption has caused distrust. If another party were in power, the IMF might have been more receptive, but no one trusts PMLN, especially Ishaq Dar.

In conclusion, it is clear that Pakistan's economic stability requires credible leadership, clear policies, and trustworthiness. While the PMLN government under Ishaq Dar's leadership failed to improve exports, industrialization, and tax collection, Khan's government has made significant progress in these areas, which has been acknowledged by international organizations. To strengthen the economy, it is crucial to implement policies that focus on increasing exports, strengthening tax collection, and improving overall business.

-----------------------------------------------------------------------------

The best maximal strategy of modern wars is to take the battle to the enemy and employ dominance through economic, asymmetric, and information warfare across both kinetic and non-kinetic means.

- India and Pakistani Military Establishment did well against Pakistan... RAW with no hype outclassed lumber 1 ghaday and nakli Whiskey phooj in and out...
 
Last edited:
A frequent criticism levelled at IMF has been that its structural adjustment programmes (not just Pak) do not address the basic weaknesses of the economy. Including issues pertaining to elite capture and defense expenditure.

This is not criticism, but an attempted distortion of reality to keep the gullible suitably misinformed, plain and simple.

The IMF is bound by its charter to help its member states when asked. It has honored its charter 22 times already and is working on the 23rd attempt for Pakistan.

Pakistan, on the other hand, has begged for rescues 22 times and failed to complete any of its promised outcomes every goddamn time, and is working on its 23rd disgraceful failure by intent.
 
Last edited:
#1 Is there something fundamentally wrong with the IMF prescriptions which makes the programmes either inherently unstable or inadequate to the task?
#2 Does the IMF bear some responsibility for the fact that it has extended a crutch 22 time unsuccessfully and by doing so pushed Pak into a state of perpetual dependency? That by refusing to bail out Pak, it might have forced Pak to carry out the required reforms?

#1: The IMF prescriptions are exactly according to the principles of sound financial management, nothing more and nothing else. It is only Pakistan's intentional failures in completing every course of treatment prescribed that is fundamentally wrong here.

#2: IMF is bound by its charter to help any member state when requested to do so. It cannot, therefore, refuse to help. It is only Pakistan's decisions that keep it in the state of perpetual dependency.
 
Last edited:
My views on all of this are based on common sense. When you borrow from any bank /entity or a person, they would want to know as to how and when you are going to pay it back.
IMF is a ”Lender” not a charity. In order to ensure that Pakistan would be eventually solvent enough to pay IMF back; IMF imposes certain conditions. It is therefore unfair to say that IMF has failed Pakistan or is the causes of oue economic ills. Pakisatn has been spending more than her income for the last 70 years that is why Pakistan has asked IMF for loan more than 20 times since 1950.

US Aid during the cold war, Soviet invasion of Afghanistan and after 9/11 provided funds to keep Pakistan her head above water but now that it is dried up, Pakistan is on verge of insolvency. Even if Pakistan is saved temperorily through the IMF help, there is no alternative but to learn to live within her means. This would mean increasing the taxes, increasing the tax base and an end to the subsidies of all kinds even if it causes the temondous hardship to the common man.
Or we can keep the country poor and simply keep increasing sales tax on poor while rich can do what ever they have been doing

Afterall it has worked for 80yrs.

One cannot refute the fact that Pakistan is 5th biggest country of the world..there will always be money made in Pakistan because there will always be people in Pakistan

Economy comes from amount of people you have yes those people will have miserable life's but will make life sweet 🧁 for army corps commanders elite and politicans
 
This is not criticism, but an attempted distortion of reality to keep the gullible suitably misinformed, plain and simple.

The IMF is bound by its charter to help its member states when asked. It has honored its charter 22 times already and is working on the 23rd attempt for Pakistan.

Pakistan, on the other hand, has begged for rescues 22 times and failed to complete any of its promised outcomes every goddamn time, and is working on its 23rd disgraceful failure by intent.
At this point, I no longer have the strength to reiterate these points over and over again.
 
My banks have also failed me. If they had extended a few million dollars in unsecured loans at a low or no cost and didn't insist on repayments, I would be so much more happier.

Did you also sign an agreement in 2019 and then started badmouthing your bank, took a UTurn on those agreements?

What a coincidence. Pakistan did the same 😂😂

Or we can keep the country poor and simply keep increasing sales tax on poor while rich can do what ever they have been doing

Afterall it has worked for 80yrs.

One cannot refute the fact that Pakistan is 5th biggest country of the world..there will always be money made in Pakistan because there will always be people in Pakistan

Economy comes from amount of people you have yes those people will have miserable life's but will make life sweet 🧁 for army corps commanders elite and politicans

I just learned you’re not even a Pakistani. Why do you care what we do with our country
 
IMF lent money to Pakistan on some conditions.

Those conditions were breached by Pakistan.

Pakistan continues to bring crooks and mismanages it own economy. No one else is to blame but Pakistan itself.

I hope the punishment translates to a drastic cut in defense spending that forces the establishment to cut back on its lavish spending. And ofcourse a total meltdown of property prices that currently is what driving the establishment stranglehold on the public.
 

Latest posts

Pakistan Affairs Latest Posts

Back
Top Bottom