Pakistan: The IMF as saviour?

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 January 26, 2023   Dawn
The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.
The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.

The irony of ironies. An institution which across the globe has been acknowledged as anti-people, elitist and responsible for increasing poverty, misery and destitution across dozens of countries, is now being seen as Pakistan’s only saviour, as it seems the rulers in this country have come round to restarting an agreement which has been in abeyance for almost a year.

The ‘there-is-no-alternative’ mantra repeated in every single article, in every single television programme and discussion, has now become conventional wisdom of and for those who have access to such voice. If we do not go to the IMF, such conventional wisdom says, ‘we’ will collapse; if we don’t agree to ‘reform’, we will go bankrupt and no one will support ‘us’, goes the new slogan repeated every day. ‘Financial apocalypse’ is here; ‘we’ are on the ‘brink of an economic meltdown’; ‘only the IMF can save us’, goes the cacophony in the public sphere.

There are those who warn us that if we agree to the harsh conditionalities of the IMF and give in to its demands, inflation will jump from the current 25 per cent to 35pc, that the dollar might actually be available but closer to Rs300 rather than the infamous boast of 200 some months ago. Electricity and gas, if available at all, will become far more expensive, as will petrol and everything else on which the economy depends. Imports, so important to the existence of those who rule, will also become substantially more expensive — reportedly, in the last six months when we have been in an acute economic crisis with dollars unavailable, 2,200 luxury cars have been imported, while medicines and numerous other essentials and raw material are no longer available in the market.

These same analysts confess that while things will become far worse if we accede to the IMF’s particularly harsh conditions, if we don’t, we will certainly default. The choice, many of them say, is between the ‘tough conditions’ of the IMF or certain default; an inflation rate of 35pc rather than 70pc. Sri Lanka is no longer a symbol of a cheap resort getaway, but the future which Pakistan will embrace if it does not swallow the bitter IMF medicine.

The consequences of financial apocalypse or economic meltdown are different for different income groups.

For the ruling elite of Pakistan, which is composed of the military as well as civilians, in different forms and measure, there is always the IMF. The IMF is its saviour. Unwilling and unable to undertake any sort of effective reform — there has been no substantial or radical economic reform policy for years, possibly decades — the ruling elite brings the economy through loot and plunder, or ‘rent-seeking’ in polite parlance, to the edge of default, to ‘the brink of economic collapse’. When extraction from the economy becomes no longer possible, the IMF emerges to rescue the elite.

As has been argued in these pages earlier, it is not the IMF which is responsible for the hardship and acute suffering brought upon by the conditionalities which this institution enforces on the country, but those who fail to govern in the name of those who elect or select them. The IMF does not take over the economy like an invading occupying force; the elite simply surrenders to the demands of the IMF having brought the economy to the brink. The IMF becomes the medium or instrument through which the rescue-the-elite mission is played out. The elite always welcomes the IMF, bitter medicine or not. Furthermore, the foolish and false assumption always is: surrender to an IMF programme and let the IMF govern and administer economic policy, and more money will flow in from countries just waiting to lend or invest in Pakistan.

The key notion here is that of ‘us’ or ‘we’, who are supposedly being rescued by the IMF; the collapse or breakdown evidently of ‘our’ economy, and so forth. There is no such thing as an ‘us’, a unilateral, collective, universal, abstract notion, without differentiation. It is critical to account for distinctions between different sections and segments of the population, for as we know, economic policy, or any policy for that matter, does not affect everyone equally. In every society and country, there are unequal social, economic and political entities and groups, all affected differently by political, economic or social action, or, especially, by inaction. For example, there is no denying the fact that Pakistan’s economy is in extreme crisis, but clearly, even this state affects different people, genders and ethnic groups, differently. The consequences of financial apocalypse or economic meltdown are different for different income groups.

And here is where the IMF comes in. The expected austerity and suffering which every IMF programme brings falls unevenly in a highly unequal society, polity and economy. While everyone faces inflation, whether of 35pc or 70pc, those who are on the lower end of the economic spectrum clearly bear a far heavier burden. Inflation, austerity, fiscal discipline, all economic factors and intervention are unevenly distributed across populations. There is no one ‘us’, no uniform notion of ‘a country’ being rescued.

While the elite will, for a short while, also bear part of the burden of ‘adjustment’, as such austerity is referred to, it is only they who will benefit once the economy has been rescued. A fistful of dollars coming in, prices being upwardly adjusted, an exchange rate which is supposedly ‘market-driven’, will offer false hope to our elite while it grumbles about the tough measures of the IMF. The reforms which take place under adjustment only rescue capital and those who profit from it. Structural reforms, such as redistribution of power or property, by class, gender and region, are never part of any adjustment programme. It is not ‘us’ that the IMF is here to save, but ‘some’; not ‘our’ country, but ‘theirs’.

The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.

Published in Dawn, January 26th, 2023