The Vicious Cycle of IMF
“The arms of others can either fall from your back, or they may weigh you down or bind you fast.”
Presciently maintained by the trailblazer of the realist school of thought, Nicollo Machiavelli, in his magnum opus ‘The Prince’, the above quotation brings home the fact that foreign dependency is beguiling and unreliable. Speaking of foreign dependency, the name of Pakistan appears on the horizon. The nation is heavily dependent on the International Monetary Fund (IMF) to nurse its economic grievances. However, instead of getting alleviated, the economic plight of the nation is witnessing an upsurge because of the highly West-centric, indifferent and strict policies of the IMF.
How IMF has further aggravated the economic ailments of Pakistan?
1. Structural adjustment programmes of IMF – an indifferent approach towards the problems of Pakistan
The Structural Adjustment Programmes (SAPs) are highly oblivious to the basic economic contours of Pakistan. The policies speak of increasing tariffs on electricity without taking into account that such a step would culminate in an increased amount of circular debt and hyped-up power theft across the country. In a similar vein, the SAPs may encourage expanding the tax net but they do so without poring over the modus operandi through it is to be done; to consider whether vertical taxation is to be employed or horizontal taxation would be a wise option. Seen through this prism, the SAPs are of least use to cure the economic enigma of Pakistan.
2. Recourse to IMF – a decision of elites
It is rather a fact that dealings and agreements with the IMF are solely the decisions of elites. These elites, under the aegis of IMF, evade taxation. The money they borrow is paid by the lower class of the country through its nose. The burgeoning inflation is one such piece of evidence of this calamity. This inflation creates widespread poverty and eviscerates Pakistan of its dream of being a nation with a strong economy.
3. Heedlessness to capacity-building of the country
Another flipside of the IMF is that this Bretton Woods institution does not focus on the capacity-building of the country. Instead of rendering it self-sufficient, the IMF purges the country of any incentive to work for the betterment of its economy. Being aware of the fact that each time its economy meets a dead-end, Pakistan can have recourse to the IMF under its begging-bowl syndrome but it fails to build capacity to recover itself from economic shocks. Owing to this, the idea of IMF in Pakistan is a fiasco.
4. IMF- the mouthpiece of America
The IMF being the mouthpiece of America cannot want Pakistan to achieve economic might because once economically viable, the country’s reliance on America will be mitigated. This would harm American interest in the region. The proponent of this belief John Perkins stated that America, under the concept of neo-imperialism, utilised these institutions to secure its interests in a particular region. Therefore, IMF is not a viable option to liberate Pakistan from its economic woes.
What can Pakistan do to cure its economic cramps?
1. Focus on regional trade
Pakistan’s trade with the regional countries is at historic lows because of the precarious situation in Afghanistan, hostilities with India and sanctions on Iran. However, the country must strive to enhance its trade with neighbouring countries. The benefit of this move is two-dimensional: first, cordial ties can be established with the neighbouring nations, and secondly, the economy of the country will pick up the pace.
2. Ameliorating the taxation system
Another way through which the economic plight of the country can be eased is to introduce reforms in the country’s taxation system. This can be done through availing horizontal taxation, dismantling the incentives of tax evasion and hiring technocrats in the relevant departments.
3. Modification of laws to attract FDI
Pakistan’s ranking on the World Bank’s Ease of Doing Business Index is 108 out of 190 economies. This calls for immediate action that must revolve around the modification of laws to attract FDI. Digitization of the economy is one such way to let the foreign currencies fall into the coffer of Pakistan.
4. Increasing the export base of the country
The country faces formidable challenges when it comes to the current account deficit (CAD) which hovers around $1.4 billion as per the statistics of the State Bank of Pakistan. This deficit is borne out of the fact that the country still supplies traditional export. The country should expand its export base by introducing technology to its exports. A shift towards manufacturing cars and phones can enhance the export base of Pakistan.
To wrap it up, it can be established on the backbone of the aforementioned arguments that the IMF can never redress the economic grievances of Pakistan. This belief is not borne out of darkness rather the neo-colonial composition of the IMF, coupled with the insensitive SAPs, renders the stable economy a far-fetching dream for Pakistan. Instead of blindly relying on this Bretton Woods institution, the country must work to introduce reforms in its trade and export sectors. The country is required to overhaul its taxation system; only then the economy of the country will sour high as rightly maintained by Mohsin Hamid:
“A brighter future awaits us if only as Pakistanis we’re willing to work for it.”
The Vicious Cycle of IMF
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