By Imad Zafar
Finally, Pakistan and the International Monetary Fund have reached an agreement according to which the IMF will lend US$6 billion to Pakistan over a period of 30 months. According to the IMF statement, “Pakistan is facing a challenging economic environment with lackluster growth, elevated inflation, high indebtedness, and a weak external position.”
The government led by Pakistan Tehreek-e-Insaf (PTI) has agreed to all the demands of the IMF, including that the exchange rate is to be decided by the open market instead of the State Bank of Pakistan, and the government will gradually reduce the subsidies offered to the public on electricity and gas. Furthermore, it is expected that more indirect taxes will be imposed on the masses in order to meet the tax-collection target, while the share of revenue of the provinces will also be revised in the next National Finance Commission Award meeting.
The terms and conditions set by the IMF are very strict, and the government, with almost no investment or other plan to attract revenue, seems to be trapped in a vicious cycle of debt. The economy has been deteriorating ever since the self-created political crisis when the military establishment ousted Prime Minister Nawaz Sharif in 2017 in a bid to take state affairs into its own hands. Ever since, the economy has been in shackles, and there is no sign of immediate relief for the masses yet. Even after the announcement of the IMF bailout package the Pakistan Stock Exchange did not show any positive signs; in fact, it lost a further 937 index points, indicating that uncertainty is still gripping the investment sector.
On the other hand, more levies on electricity and gas and indirect taxes on the masses, who are already subject to the worst inflation in a decade, will mean that the middle and lower middle classes will eventually diminish, and this will not only mean an end to the puppet government of the PTI but it could also prove to be the last nail in the coffin of the establishment that has been taking a large chunk of the nation’s resources in the name of defense for the last 71 years and has been manipulating the political discourse of the country.
It is strange to see that there is no reduction in the defense budget, and instead the focus is on minimizing the subsidies given to the masses, such as energy-sector structural reforms. One wonders why even international institutions like the IMF do not point toward the most non-productive expenditures on defense. If the IMF can intervene in Pakistan’s internal matters by directing it to free its currency from central-bank control, then why can’t it simply point ask the country to cut its defense spending? Why do even the international financial institutions act as if they are being dictated to by the White House and are only interested in somehow keeping Pakistan’s war business ticking by keeping it alive with aid?
By agreeing to the IMF demand of giving the control of the rupee to the open market, the PTI government has in effect agreed to the further devaluation of the currency, as from now on speculators will control its value. Pakistan’s economy has already shrunk to $280 billion from $313 billion in one year of PTI rule, and this step of further devaluing the currency will only hamper the prospects of economic revival.
Now with the expected GDP growth rate of 3.3%, which is even lower than under Sharif, when at times it was almost 6%, the current government by raising interest rates and agreeing to devalue the currency is hell-bent on further shrinking the economy.
The question also arises as to how, after this government borrowed almost $6 billion from Saudi Arabia, the United Arab Emirates and China, it was not able to rectify even a single thing in the economy, it will be able to correct the course of the economy with another $6 billion in aid from the IMF. Unless the unnecessary expenses on defense are curtailed and an agriculture tax is imposed, nothing will change, and with the current economic condition Pakistan will easily fall prey to the US and will again soon be fighting proxy battles for Washington and Riyadh in order to survive.
As far as the masses are concerned, they are already bearing the brunt in the form of major price increases and unemployment. For most Pakistanis, life is all about breathing another moment and feeding themselves for one more day.
The artificial political discourse created by the establishment has destroyed the economy, which was going very well until 2017. It was the desire to control the political discourse of the country by the establishment and politicians like Imran Khan and Asif Zardari lending a hand to undermine democracy that have resulted in an economic turmoil that is slowly and gradually weakening the country, and now even institutions like the IMF are dictating to Pakistan what to do and what not to do. The “traitorous” and “corrupt” Sharif was able not only to maintain a prolific GDP growth rate, but he smartly aligned with China and Russia and gradually got Pakistan out of the clutches of Washington and its proxy financial institutions.
This has been the tragedy of Pakistan since the beginning, that the military establishment has enjoyed the status of a sacred cow, while it terms popular leaders like Zulfikar Bhutto and Nawaz Sharif traitors only to assert its own authority on state resources, and puppets like Asghar Khan and Imran Khan have been declared patriots and clean of any corruption because they are weak and incapable of governance and therefore cannot challenge the hegemony of the establishment. Unless the establishment realizes that in a bid to assert its authority it has brought the state to the brink of an abyss, nothing will change, and Pakistan will never be able to leave the begging bowl.