Has IMF failed Pakistan?

[teX]

IMF should not give 1 $ let pakistanis solve own issues .

True.

People can’t simply relate Pakistans problems to their everyday life.

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

Has IMF failed Pakistan?

IMF’s prescription hasn’t shielded the poor.

www.dawn.com

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

Its like complaining a neighbour for not being able to loan more money for your luxurious life.

 

[hussain0216]

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.

The fundamental issue is we need a government with a massive mandate, so it can finally bring change

We also need to have a clear policy and HONESTY, a PM who states clearly we need atleast a decade of austerity and economic hardship so we can fix some fundamental flaws



We can't have subsidies and positive bullshit promises of streets paved with gold


The illiterate awam needs to understand the government will need to be harsh in order to change society, we can't have a few years of hardship constantly battling the corrupt opposition, media, establishment because then the correct policies can't be enacted because the people are too dumb to understand we need them

Pakistan has a relatively low amount of debt compared to other nations

We can completely transform Pakistan within a decade if we enact a good economic policy

Pakistan can easily become the most economically successful state in South Asia

But we need to be harsh, harsh on the opposition
Harsh on useless afghans who no longer deserve any respect or mercy
Harsh on TTP, BLA types with a ruthless merciless campaign against them, their families and anyone supporting them


This starts with elections and voting emass for PTI


And no bullshit like that of Karachi where you have endless moaning like a bitch and then they vote for the usual shit

 

[VCheng]

At this point, I no longer have the strength to reiterate these points over and over again.

Tired so early? At least keep at it for a decade and then keep going.

It helps to know that speaking the truth never tires one out. Never.

 

[fisher1]

Tired so early? At least keep at it for a decade and then keep going.

It helps to know that speaking the truth never tires one out. Never.

Must not be truth then

 

[VCheng]

Must not be truth then

Only truth endures, which is proof enough for me. Obviously, please feel free to differ. It is your right, however, correcting your opinions is not my problem.

 

[fisher1]

Only truth endures, which is proof enough for me. Obviously, please feel free to differ. It is your right, however, correcting your opinions is not my problem.

Chill, it was a joke.

 

[VCheng]

Chill, it was a joke.

I would, except that Pakistan's economy is only a sick joke being played on its people, and one that I cannot find funny.

 

[fisher1]

I would, except that Pakistan's economy is only a sick joke being played on its people, and one that I cannot find funny.

Blah blah

Same shit different day

PTI can eliminate corruption in 90 days: Imran

PTI can eliminate corruption in 90 days: Imran

www.nation.com.pk

Pakistan economy is always doing bad when PTI isn’t in power and inflation is good for us when PTI in power.

103>190 usd to PKR was also an economic joke played on us but people like you were failing to find sympathy for us then. You used to call me names for criticising IK then.

Just topidrama nothing more.

PTI is half responsible for current economic situation. I don’t know of a single country where there’s political instability and it progresses. IK even used to do dharnas during 2014 and urging people to not give taxes and burn their bills causing govt to suffer. He can’t see govt doing well so he tries his utmost to create fear and instability in anyone who might even dare invest in Pakistan.

He even insulted our guests from foreign country coming to Pakistan.

I have been watching USD rate’s everyday and everytime there’s some huge political event by IK, it fluctuates. He gives statements to create fear in dollar hoarders and traders panic buying USD.

 

[VCheng]

Same shit different day

Of course.

Same circus, different clown.

 

[allaisa]

IMF has not failed Pakistan. It is Pakistan which failed Pakistan. Even Dawn today editorilized that Pakistan should follow India's example of 1991 reset. But will Pakistan learn? Not in a thousand years.

 

[zn426]

To be honest IMF hasn't failed Pakistan, but their methods of collections could use some work.
I would have rather put the efforts on strong economic documentation, boosting exports, and getting a real picture of what the Pakistani economy is like. By immediately putting the priority on making the Pakistani government hike taxes, without knowing what Pakistan's strengths and weaknesses are, hurts the government's ability to get things done. It would have been better to offer the loan with 2 year grace period while Pakistan got moving on structural reforms.
Mind you, that's only with a PTI government. the PDM or any other government shouldn't be given any leeway.
With that said, the growth in Pakistani exports and remittances under PTI cannot be ignored. Nor can IK's strong work in implementing banking reforms and enormously improving the country's VC and startup eco-system. If Pakistan ever wants to make sure things are manufactured completely at home, to have a purely indigenous economy, it needs to start with enabling capable business leaders to fix critical projects. I've met tons of competent and intelligent people in Pakistan. The same old people need to be out so good leadership can come in.

I loved the idea of putting the current PDM leadership along with senior generals on a very long cruise to Guantanamo Bay.

 

[Menace2Society]

If it wasn't for IMF, Pakistan would have collapsed by 1960

 

[White and Green with M/S]

Pakistan needs bloody revolution to get rid of these vultures

 

[Asian.Century]

Why a $3 Billion IMF Loan Isn't Enough to Save Pakistan's Economy​

In June, Pakistan was in a race against time to secure $1.1 billion from the International Monetary Fund (IMF) in a bid to solve its worst economic crisis since gaining independence from Britain in 1947. Days before an existing bailout package was set to expire, the country’s prime minister, Shehbaz Sharif, held last-minute talks with the IMF after scrambling to meet its austerity conditions, in which he pledged to revise Pakistan’s budget by hiking tax rates and cutting spending.

That led to a dramatic reversal from the global lender: it announced a new, bigger-than-expected conditional loan of $3 billion, which the IMF calls a stand-by arrangement (SBA). On July 12, the IMF’s Executive Board approved the deal, allowing for an immediate disbursement of about $1.2 billion.

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“The new SBA would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead,” the IMF stated.

While the deal offers a respite to Pakistan’s ailing economy, experts warn the country is far from solving the structural problems that led to defaults in the past.

Prime Minister Shahbaz Sharif, right, meets with International Monetary Fund's Managing Director Kristalina Georgieva in Paris, France, on June 22, hoping to unlock a $6 billion bailout and gain the release of a critical tranche of $1.1 billion in loans which has been on hold since November.

Prime Minister Office/AP

“Pakistan has been living beyond its means by borrowing from bilateral lenders and multinational institutions,” says Steve H. Hanke, a professor of applied economics at Johns Hopkins University. “All this borrowing has done Pakistan little good.”

Over the years, the IMF has drawn criticism for its lending practices, with Nobel Prize-winning economist Joseph Stiglitz arguing that many of the conditions it imposes on borrowers—like fiscal austerity and high-interest rates—have often been counterproductive for impoverished countries, and devastating for their local populations. In the case of Pakistan, it appears the IMF is not deviating from its traditional course.

Here’s what to know about Pakistan’s economic crisis:

What has caused the downturn in Pakistan’s economy?​

Pakistan, a nation of 240 million people, has a gross domestic product of $376 billion, slightly larger than Hong Kong’s. Its economy was already struggling after years of financial mismanagement, but last year, the country was pushed to the brink by a global energy crisis caused by Russia’s war in Ukraine and catastrophic floods that impacted the lives of millions of Pakistanis.

“We call it the ‘Triple-C crisis’: COVID, the conflict in Ukraine, and climate change,” says Abid Qaiyum Suleri, the executive director of the Sustainable Development Policy Institute in Islamabad. “All three factors aggravated Pakistan’s economic situation.”

The 2022 floods—which at one point drenched a third of the country, displaced 8 million people and damaged more than 2 million houses—also resulted in economic losses of more than $30 billion, according to an assessment from the Pakistani government in partnership with the U.N., the E.U., the Asian Development Bank and the World Bank.

Read More: Pakistan Flooding Raises Tough Questions About Who Should Pay For Catastrophic Climate Impacts

Crushing poverty and shrinking job prospects have also driven emigration out of the country. In 2022, the Bureau of Emigration recorded more than 750,000 people leaving Pakistan, a threefold increase from 2021.

Pakistan recorded record-high inflation of 38% for two consecutive months in June as Sharif, the prime minister, struggled to implement a recovery plan. To boost its popularity with voters, the government increased energy subsidies and depleted the country’s foreign exchange reserves to a critically low level of $2.9 billion, the lowest in nine years.
What is Pakistan’s latest arrangement with the IMF?

Under the new agreement, the IMF will disburse $3 billion over nine months. To clinch the deal, Pakistan revised its annual budget by raising taxes by $750 million and hiking its interest rate to 22%, mainly to curb soaring inflation.

The austerity reforms came after Sharif spoke on June 27 about the bailout funds with IMF Managing Director Kristalina Georgieva, who said Pakistani authorities had taken “decisive measures” to bring policies in line with the IMF’s economic reform program.

The deal replaces a four-year Extended Financing Facility program of $6.5 billion, originally signed by former Prime Minister Imran Khan in 2019, which expired last month. Last November, it was due for its ninth review by the global lender after previously clearing eight of the 11 reviews. But Khan’s government deviated from its IMF obligations days before he was ousted from the government in a parliamentary vote.

To date, Pakistan has relied on 23 IMF relief programs. Husain Haqqani, a former Pakistani ambassador to the U.S., likened the IMF to an intensive care unit (ICU) for Pakistan. “But if somebody has to go to the ICU 23 times, then something is wrong with the overall treatment plan,” he says.

Will the IMF’s new deal help Pakistan’s economic recovery?

The new IMF funds will likely bring short-term relief by unlocking credit from other financiers, including the private market, and strengthening prospects for foreign direct investment. One day before the IMF board meeting, Saudi Arabia announced it would provide Pakistan with $2 billion in financial support.

“It’s bridge financing that would provide some sort of breathing space to help in mobilizing funds from friendly countries, as well as from other multilateral donors,” says Suleri.

However, analysts and political advisers speaking to TIME also warned that in the long term, they are only a band-aid solution unless Pakistan can implement the serious, large-scale reforms required to tackle issues like a heavy reliance on costly fuel imports, an agricultural sector grappling with water and energy shortages, a lack of investment in public welfare, and a political elite prone to corruption.

What’s more, the government now faces repaying $25 billion in debt in the current fiscal year, which it would likely struggle to repay without further financial assistance from lenders like China and Saudi Arabia, as well as another IMF bailout.

Read More: China Spent Years Lending to Low-Income Countries. That’s Becoming a Problem.

“The good news is that a lot of Pakistanis are now saying that we need a fundamental shift in our economy,” says Haqqani. “The bad news is that there’s still no clarity on whether the elite is willing to give up their privileges and prerequisites.”

He continues, “Will the government be strong-willed enough to push back sufficiently to get what it wants? That is going to determine where things go next.”

The IMF is Lending $3 Billion to Pakistan-Is it Enough?

The cash-strapped nation clinched the crucial bailout hours before the IMF's deadline.

time.com

 

[ghazi52]

.,.,
Siasat.pk
The biggest accusation against Imran Khan is that he has damaged Pakistan's relations with America, China, Saudi Arabia, as if it has been accepted that we have no economic policy except the dollars coming from these 3 countries.

The only claim was to bring dollars from these three countries, they did not even know what is the economy and economic policy.

When they went out to ask their friends, they found out that what is the reality.

Habib Akram!!!