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Beg, borrow, repeat: Pakistan’s IMF addiction continues even as its finance minister leaves

Andhadhun

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https://theprint.in/opinion/beg-bor...en-as-its-finance-minister-leaves/223744/amp/

Beg, borrow, repeat: Pakistan’s IMF addiction continues even as its finance minister leaves

Pakistan’s military-driven economic decision-making is based on ‘Jazba’ and 'Chanda'.

Asad Umar, Pakistan's former finance minister, speaks at the International Monetary Fund (IMF) | SeongJoon Cho/Bloomberg


As Pakistan’s finance minister, Asad Umar, stepped down within a couple of days of announcing that Pakistan will soon get its 13th IMF bailout in 30 years, it is safe to speculate that the discussions with the IMF are not going as well as Pakistanis would like. Umar’s departure from Imran Khan’s cabinet has come in a virtual coup that has brought military favourites from previous regimes into office.

The Pakistani military has a view on everything, including management of the economy, although military officers are not trained in economic matters. The generals who really rule Pakistan cannot accept that the country’s resources cannot sustain an over-sized military and the periodic wars it initiates. Nor do they see the connection between their preferred policies, such as support for Jihadi terrorism, and declining investment or foreign trade.

Under the generals’ influence, Pakistan prides itself as a warrior nation. Investors and traders are looked down upon although in prosperous countries they are seen as drivers of economic growth and prosperity. Politicians and civil servants are frequently sent to prison for signing projects with foreign investors, along with cancellation of those contracts.

Tax collection remains low because land-owning politicians, often beholden to the military, do not agree to paying taxes. Loss-making public sector corporations, which provide lucrative post-retirement jobs to military officers, are neither shut down nor sold off even though their privatisation has been part of the promised reforms offered each time Pakistan borrows from the International Monetary Fund (IMF).

Economies grow amid stability, rule of law, enforceability of contracts, and security for both capital and the capitalists. None of those are available in Pakistan. Instead, policies are often driven by myths, such as the notion that billions of dollars of ‘ill-gotten money’ belonging to Pakistanis is lying in foreign banks that can be confiscated and repatriated by an ‘honest’ (read pro-army) leadership. Or, the fantasy that multi-billion-dollar projects like huge dams can be built by raising donations from well-meaning Pakistanis.

Pakistan’s military-driven economic decision-making is based on ‘Jazba’ (passion, spirit, and strong feeling or emotion) and Chanda (donations). In economic matters, Prime Minister Imran Khan has been a civilian advocate of the Pakistan military’s simplistic paradigm. His assurances to Pakistanis that they should not worry – “Aap nay Ghabrana Nahin hai”— have become a joke or a legend, depending on which side of Pakistan’s political divide one stands.

But economists look at hard numbers and are seldom swayed by the belief that God makes special provision for nations led by honest patriots. That is why Khan had to beg for $10 billion from Saudi Arabia, China, and the UAE to stave off a balance of payments crunch soon after coming to office in the hope that this would preclude his government from having to go to the IMF. That money is now running out.

Turning to the IMF is the economic equivalent of a sick individual being in intensive care. Considering that Pakistan has spent 22 years in the last three decades in the IMF’s intensive care, the country’s economy obviously suffers from some serious ailment. This might be the time to reflect on the source of the disease rather than focusing on the symptoms of the latest bout of illness.

Pakistan has battled budget and trade deficits for years. Its exports and tax revenues have failed to increase sufficiently, and its foreign currency reserves have never risen beyond the value of a few months’ imports. Pakistan has often borrowed heavily to make up for insufficient revenues and exports, increasing sovereign debt. In recent years, that has led to onerous external debt payments and a weak rupee.

Pakistan’s repeated knocks on the IMF’s door come whenever the country faces a balance of payments crisis. Pakistan has borrowed from the IMF 18 times since 1972. Compare that with only 10 IMF loans for Bangladesh in the same period. Pakistan’s IMF borrowings ran to an estimated $19 billion, while Bangladesh’s dealings with the IMF were a modest $2.7 billion. With rising exports, Bangladesh has not sought help from the IMF since 2015.

The comparison with Bangladesh is important because Pakistan’s Punjabi elite looked down on what was their country’s Eastern wing from 1947 until the Bengalis successfully fought for independence in 1971. On the eve of its independence, Bangladesh was more populous, more illiterate, and much poorer than Pakistan. It now has a smaller and more literate population and its GDP, which stood at $6 billion in 1972, has grown to over $249 billion.

While Pakistan invested in its army and nuclear weapons, Bangladesh invested in its people. Its literacy rate rose from 17 per cent in 1971 to 72 per cent in 2016, putting Pakistan’s 58 per cent literacy rate in 2018 (up from 22 per cent in 1971) to shame. The more literate Bangladeshis create a better human capital pool, which in turn allows their country to produce value-added goods.

While Pakistan still sells cotton yarn to the world, Bangladesh exports garments that fetch higher prices. Literate Bangladeshi tailors produce garments that meet foreign buyers’ specifications; as a result, cotton textile exports of Bangladesh, which does not produce cotton, exceed in value against those from Pakistan, which is one of the world’s major cotton producers.

Instead of addressing these fundamental issues, Pakistan’s generals constantly search for a well-connected international banker, multi-national corporation executive, or a former World Bank official who would straighten Pakistan’s balance sheet with a few more loans or donations. That keeps the Jazba and Chanda cycle going but does not create a healthy economy.

Just before he was forced to quit, finance minister Umar had been quoted in the magazine Euromoney, promising to end Pakistan’s addiction to the IMF. Ironically, the same magazine had cited General Pervez Musharraf’s finance minister, Shaukat Aziz, making the same promise while anointing him as ‘Finance Minister of the Year’ in 2001.

Euromoney, which has sometimes been accused of “surviving on soft advertorial” and whose “various annual awards seemed weighted towards clients that had bought the most advertising” also saw “encouraging signs of a sustainable period of growth” in Pakistan’s economy in April 2017, just before General Qamar Bajwa pulled the rug from under former Prime Minister Nawaz Sharif’s feet.

If the army’s meddling did not allow previous IMF programmes to pave the way for sustainable economic growth in the past, it is unlikely that their latest efforts at engineering will result in anything better.

A new finance minister might be able to borrow money from the IMF on different terms than the outgoing one. But at the end of the day, Pakistan will have to address its huge military burden, poor social indicators, and unreliable investment climate or remain on life support.

Husain Haqqani, director for South and Central Asia at the Hudson Institute in Washington D.C., was Pakistan’s ambassador to the United States from 2008-11. His latest book is ‘Reimagining Pakistan’.
 

Andhadhun

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i don't need to say anything more, this ghardar pithoo of zardari targeting the military again.
He was your ambassador to the United States from 2008-11.

He is also well read and educated enough to become the director for South and Central Asia at the Hudson Institute in Washington D.C

As far as qualifications goes, he is right up there.
 

nahtanbob

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https://theprint.in/opinion/beg-bor...en-as-its-finance-minister-leaves/223744/amp/

Beg, borrow, repeat: Pakistan’s IMF addiction continues even as its finance minister leaves

Pakistan’s military-driven economic decision-making is based on ‘Jazba’ and 'Chanda'.

Asad Umar, Pakistan's former finance minister, speaks at the International Monetary Fund (IMF) | SeongJoon Cho/Bloomberg


As Pakistan’s finance minister, Asad Umar, stepped down within a couple of days of announcing that Pakistan will soon get its 13th IMF bailout in 30 years, it is safe to speculate that the discussions with the IMF are not going as well as Pakistanis would like. Umar’s departure from Imran Khan’s cabinet has come in a virtual coup that has brought military favourites from previous regimes into office.

The Pakistani military has a view on everything, including management of the economy, although military officers are not trained in economic matters. The generals who really rule Pakistan cannot accept that the country’s resources cannot sustain an over-sized military and the periodic wars it initiates. Nor do they see the connection between their preferred policies, such as support for Jihadi terrorism, and declining investment or foreign trade.

Under the generals’ influence, Pakistan prides itself as a warrior nation. Investors and traders are looked down upon although in prosperous countries they are seen as drivers of economic growth and prosperity. Politicians and civil servants are frequently sent to prison for signing projects with foreign investors, along with cancellation of those contracts.

Tax collection remains low because land-owning politicians, often beholden to the military, do not agree to paying taxes. Loss-making public sector corporations, which provide lucrative post-retirement jobs to military officers, are neither shut down nor sold off even though their privatisation has been part of the promised reforms offered each time Pakistan borrows from the International Monetary Fund (IMF).

Economies grow amid stability, rule of law, enforceability of contracts, and security for both capital and the capitalists. None of those are available in Pakistan. Instead, policies are often driven by myths, such as the notion that billions of dollars of ‘ill-gotten money’ belonging to Pakistanis is lying in foreign banks that can be confiscated and repatriated by an ‘honest’ (read pro-army) leadership. Or, the fantasy that multi-billion-dollar projects like huge dams can be built by raising donations from well-meaning Pakistanis.

Pakistan’s military-driven economic decision-making is based on ‘Jazba’ (passion, spirit, and strong feeling or emotion) and Chanda (donations). In economic matters, Prime Minister Imran Khan has been a civilian advocate of the Pakistan military’s simplistic paradigm. His assurances to Pakistanis that they should not worry – “Aap nay Ghabrana Nahin hai”— have become a joke or a legend, depending on which side of Pakistan’s political divide one stands.

But economists look at hard numbers and are seldom swayed by the belief that God makes special provision for nations led by honest patriots. That is why Khan had to beg for $10 billion from Saudi Arabia, China, and the UAE to stave off a balance of payments crunch soon after coming to office in the hope that this would preclude his government from having to go to the IMF. That money is now running out.

Turning to the IMF is the economic equivalent of a sick individual being in intensive care. Considering that Pakistan has spent 22 years in the last three decades in the IMF’s intensive care, the country’s economy obviously suffers from some serious ailment. This might be the time to reflect on the source of the disease rather than focusing on the symptoms of the latest bout of illness.

Pakistan has battled budget and trade deficits for years. Its exports and tax revenues have failed to increase sufficiently, and its foreign currency reserves have never risen beyond the value of a few months’ imports. Pakistan has often borrowed heavily to make up for insufficient revenues and exports, increasing sovereign debt. In recent years, that has led to onerous external debt payments and a weak rupee.

Pakistan’s repeated knocks on the IMF’s door come whenever the country faces a balance of payments crisis. Pakistan has borrowed from the IMF 18 times since 1972. Compare that with only 10 IMF loans for Bangladesh in the same period. Pakistan’s IMF borrowings ran to an estimated $19 billion, while Bangladesh’s dealings with the IMF were a modest $2.7 billion. With rising exports, Bangladesh has not sought help from the IMF since 2015.

The comparison with Bangladesh is important because Pakistan’s Punjabi elite looked down on what was their country’s Eastern wing from 1947 until the Bengalis successfully fought for independence in 1971. On the eve of its independence, Bangladesh was more populous, more illiterate, and much poorer than Pakistan. It now has a smaller and more literate population and its GDP, which stood at $6 billion in 1972, has grown to over $249 billion.

While Pakistan invested in its army and nuclear weapons, Bangladesh invested in its people. Its literacy rate rose from 17 per cent in 1971 to 72 per cent in 2016, putting Pakistan’s 58 per cent literacy rate in 2018 (up from 22 per cent in 1971) to shame. The more literate Bangladeshis create a better human capital pool, which in turn allows their country to produce value-added goods.

While Pakistan still sells cotton yarn to the world, Bangladesh exports garments that fetch higher prices. Literate Bangladeshi tailors produce garments that meet foreign buyers’ specifications; as a result, cotton textile exports of Bangladesh, which does not produce cotton, exceed in value against those from Pakistan, which is one of the world’s major cotton producers.

Instead of addressing these fundamental issues, Pakistan’s generals constantly search for a well-connected international banker, multi-national corporation executive, or a former World Bank official who would straighten Pakistan’s balance sheet with a few more loans or donations. That keeps the Jazba and Chanda cycle going but does not create a healthy economy.

Just before he was forced to quit, finance minister Umar had been quoted in the magazine Euromoney, promising to end Pakistan’s addiction to the IMF. Ironically, the same magazine had cited General Pervez Musharraf’s finance minister, Shaukat Aziz, making the same promise while anointing him as ‘Finance Minister of the Year’ in 2001.

Euromoney, which has sometimes been accused of “surviving on soft advertorial” and whose “various annual awards seemed weighted towards clients that had bought the most advertising” also saw “encouraging signs of a sustainable period of growth” in Pakistan’s economy in April 2017, just before General Qamar Bajwa pulled the rug from under former Prime Minister Nawaz Sharif’s feet.

If the army’s meddling did not allow previous IMF programmes to pave the way for sustainable economic growth in the past, it is unlikely that their latest efforts at engineering will result in anything better.

A new finance minister might be able to borrow money from the IMF on different terms than the outgoing one. But at the end of the day, Pakistan will have to address its huge military burden, poor social indicators, and unreliable investment climate or remain on life support.

Husain Haqqani, director for South and Central Asia at the Hudson Institute in Washington D.C., was Pakistan’s ambassador to the United States from 2008-11. His latest book is ‘Reimagining Pakistan’.
Mr Haqqani might be exaggerating a few things. but the basic point is valid
 

pahadi

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@Andhadhun yaar sach naa bola karo, inhe jhooth lagta hai, tum jhooth bola karo, inhe sach lagega...
BTW Imports must have become expensive, why not introduce Pakistani companies to fulfill the demands? Its good time to invest in home grown products...
 

Andhadhun

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Compounded by the fact that this piece is published in Indian media.

I wish I could give someone supari for H Haqqani's head to be served to me on a silver platter.
Indian Media is just the messenger.

What is the point of killing a sane voice ? You refuse to kill all the insane voices inside pakistan who preach hate day in and day out. But want this man who does not even live in pakistan, dead ?

Maybe you should introspect about the kind of man you are.

@Andhadhun yaar sach naa bola karo, inhe jhooth lagta hai, tum jhooth bola karo, inhe sach lagega...
BTW Imports must have become expensive, why not introduce Pakistani companies to fulfill the demands? Its good time to invest in home grown products...
They don't have too many how grown products.

For e.g. pakistan exports raw cotton.

BD OTOH exports ready made cloths.

See the difference ?

he doesn't care about economy or IMF, his only agenda is to target Pakistani military.

you should read some articles about Memogate scandal and who this ghardar/traitor fled the country.
Its about time pakistani civilians target your military and bring them under your control. Rather than the other way around.

If he would have really forged a letter representing a head of state, do you think they would have made him the director for South and Central Asia at the Hudson Institute ?

It looks like he was made a scrape goat to save Zardari.
 

Respect4Respect01

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Its about time pakistani civilians target your military and bring them under your control. Rather than the other way around.

If he would have really forged a letter representing a head of state, do you think they would have made him the director for South and Central Asia at the Hudson Institute ?

It looks like he was made a scrape goat to save Zardari.
he was not made a scapegoat by Zardari, he is most likely still in contact with him because he is a minion. Zardari asked him to write the letter and then Hussain Haqqani wrote the letter and sent to Mike Mullen through Mansoor Ijaz (the person who exposed this scandal later).

Just think about it for a minute, What if current Indian Ambassador to USA writes a letter to american Army chief and asks for their help to weaken the Indian army and get rid of RAW, in return the Americans will get access to nukes and can do drone strikes anywhere in the country without permission.
 

Andhadhun

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he was not made a scapegoat by Zardari, he is most likely still in contact with him because he is a minion. Zardari asked him to write the letter and then Hussain Haqqani wrote the letter and sent to Mike Mullen through Mansoor Ijaz (the person who exposed this scandal later).

Just think about it for a minute, What if current Indian Ambassador to USA writes a letter to american Army chief and asks for their help to weaken the Indian army and get rid of RAW, in return the Americans will get access to nukes and can do drone strikes anywhere in the country without permission.
If the Indian prime minister ever had to seek american help to control the IA and RAW then I would say its time to dismiss the ENTIRE IA and RAW and start afresh.

End of the day the PM has been directly elected by the public, so they carry FAR FAR more credibility than any official of IA or RAW.

The very fact that he had to get US help shows the rot in the system. Every body in India would have risen in support of the Executive and against the IA.

$hit I am pretty sure almost all in the IA themselves would rise in protest against the chief of IA and there would be mutiny.
 

Respect4Respect01

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If the Indian prime minister ever had to seek american help to control the IA and RAW then I would say its time to dismiss the ENTIRE IA and RAW and start afresh.

End of the day the PM has been directly elected by the public, so they carry FAR FAR more credibility than any official of IA or RAW.

The very fact that he had to get US help shows the rot in the system. Every body in India would have risen in support of the Executive and against the IA.

$hit I am pretty sure almost all in the IA themselves would rise in protest against the chief of IA and there would be mutiny.
lol i think your opinion would be totally different if anything like that really happened in India.
The reason why Zardari wanted to weaken the ISI was so his corruption could not be exposed and the best reason that comes into my mind is that he wanted make Pakistan his private property. He killed his own wife (most likely) and produced a will out of thin air that made him the head of PPP, then sympathy votes made him the president. Hes not a leader but a criminal who has killed hundreds of people and forcefully snatched over 40 Sugar Mills from people. You probably don't follow Pakistani media, recently our Supreme Court shifted his Fake Accounts Case (billions of rupees/dollars in fake accounts made in the names of dead people and some other hundreds of innocent people who never knew their accounts existed) to Islamabad from Karachi because investigation team's life was in danger and to prevent record from being burned. Zardari is a criminal, he is not a politician, so i hope you understand what were his real motives behind Memogate scandal.
 

Andhadhun

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lol i think your opinion would be totally different if anything like that really happened in India.
The reason why Zardari wanted to weaken the ISI was so his corruption could not be exposed and the best reason that comes into my mind is that he wanted make Pakistan his private property. He killed his own wife (most likely) and produced a will out of thin air that made him the head of PPP, then sympathy votes made him the president. Hes not a leader but a criminal who has killed hundreds of people and forcefully snatched over 40 Sugar Mills from people. You probably don't follow Pakistani media, recently our Supreme Court shifted his Fake Accounts Case (billions of rupees/dollars in fake accounts made in the names of dead people and some other hundreds of innocent people who never knew their accounts existed) to Islamabad from Karachi because investigation team's life was in danger and to prevent record from being burned. Zardari is a criminal, he is not a politician, so i hope you understand what were his real motives behind Memogate scandal.
Its not ISI's job to expose corruption.

Its the job of the police, the press, the public and the Judiciary. There is no short cut to justice.

If he is a criminal, let the due process take care of it. If the due process is broken, FIX IT.

But to pretend to be the judge, jury and executioner should be unacceptable.


As Solzhenitsyn observed, the Soviet Gulags were full of party faithful who were convinced their release would be imminent if only the error of their incarceration could be brought to the attention of the authorities.
 

Taimoor Khan

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He was your ambassador to the United States from 2008-11.

He is also well read and educated enough to become the director for South and Central Asia at the Hudson Institute in Washington D.C

As far as qualifications goes, he is right up there.
And an absconder to not just an ordinary court, but the mother of all courts, the supreme court of Pakistan.

There is no credibility of criminals.
 

Andhadhun

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And an absconder to not just an ordinary court, but the mother of all courts, the supreme court of Pakistan.

There is no credibility of criminals.
That would depend on the credibility of the Supreme court. ........... which I think is not much.

What is worst Pakistan begging and borrowing or Indian getting slapped on the face by a begging borrowing country
So the question is if being a Beggar is bad or is getting slapped by a beggar worse ?

A Beggar has nothing to loose. He can slap anyone. There is not much worth attached to that.
 

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