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No oxygen in the IMF ventilator

Imran Khan

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No oxygen in the IMF ventilator


Tuesday, November 11, 2008
Mosharraf Zaidi

Being of Pakistani origin qualifies an IMF employee to be as much of a Pakistani economy expert, as being of Pakistani origin qualifies a child that eats a lot of Krispy Kreme doughnuts to be an expert in Pakistani child nutrition. That is, not very much. IMF economists that spend the better part of multiple decades prescribing bitter pills for poor countries should stick to pretending to know Latin American debt markets. The utter brazenness of IMF pensioners advocating an IMF programme for Pakistan is so typical, it makes the challenge of affecting change in Pakistan for Pakistanis like Raza Rumi, Masooda Bano, and Harris Khalique (among dozens of others), much, much more difficult. How are these Pakistanis supposed to take on conflict of interest in the public sector for example, when the loudest IMF-type "reform" voices are IMF employees or pensioners?

How out of touch are the pundits that are not only proposing Pakistan's re-entry to the IMF club, but arguing for it vociferously, day and night, on television and in newspapers? Well, while the rest of the world is taking a moment to bask in the sheen of the triumph of ideas and idealism in Barack Obama's election victory in the US, the freshest idea these guys can come up with is to drag Pakistan back into the same black hole it has been to eleven times before. How unrepentantly docile a response does an IMF programme represent? Consider this. Pakistan was chosen as a case study for the first-ever evaluation conducted by the IMF's own Independent Evaluation Office. Why? Pakistan represents a unique country, which until 2002 had the longest-running relationship with the IMF in the world. No country to that point had spent as much time in board rooms with the IMF negotiating loans and conditionalities. Here's what the IMF's own evaluators had to say about the IMF and Pakistan in this report: "Serious doubts about the prospects of future implementation of the program would have had to be raised."

So while IMF cheerleaders (who happen to be former IMF employees) are kicking and screaming for another IMF programme for Pakistan, it is not only the poets that have a problem with an IMF solution, it's the thieves too. The IMF itself has "serious doubts" about how effective yet another IMF programme can be for Pakistan.

Who else is against an IMF programme for the country? Most civil-society leaders, who tend to lean left of centre, want Pakistan to default. Most defence policy hawks, who tend to lean right of centre, have also endorsed the idea that Pakistan must default. Common Pakistani expats from around the world are excited--not just in agreement with, but actually excited--about the prospects of a Pakistani default. Young Pakistanis just starting their careers? Deeply motivated to rough it out, rather than use unsustainable crutches. Pakistan spending its way into a deep dark hole has become somewhat of a time-honoured tradition for this country. The fact that a radical solution like default is as popular as it seems to be should send serious and stern signals of warning to decision-makers at the State Bank, the Ministry of Finance and at IMF headquarters in Washington, DC.

The popularity of a radical solution alone is bad enough. Even more worrying--indeed, incredibly worrying--is how the issue bridges the bipartisan divide. The two most polar positions in Pakistani political economy--the Islamabad hawks, and the Islamabad NGO-wallahs--are aligned when it comes to another IMF programme. Who will be left for the Washington Consensus to co-opt if these two get together on this issue?

Of course, given that former IMF employees never worry about the political viability of their soup-in-a-can prescriptions, or the future of the country they are about to tag when they are with the IMF, it is only reasonable that they not worry after they are outside the agency. In fact, as the crisis becomes more and more desperate, the IMF cheerleaders become more and more shrill. Instead of taking pause to reflect about the state of a country that rewards cavemen with ministerial portfolios, that prioritises begging-bowl economics over infrastructure investments, and that values ideology over ideas--the IMF gang clearly wants one more shot at "fixing" Pakistan.

What anyone who has spent the better part of the last decade in the trenches in Pakistan--rather than competing with the Republic National Committee at Neiman Marcus--has learnt, is that Pakistan can't be fixed by the IMF, or any other external force. This is a beast of a country. It has its own momentum, its own political compulsions, and it requires its own dedicated experts. At PIDE, PILER, PIEDAR, SPDC, and SDPI many already exist, but have almost no voice. Their voice is stolen from them by jet-setting Washington Consensus operatives that have opacity and multiple interests pouring out of their international roaming Blackberries.

The IMF evaluation of its work in Pakistan does not specify Pakistanis working at the IMF at the heart of the problems it has had in being successful in Pakistan, but it raises enough questions to raise more questions about why even basic due diligence does not occur when it comes to the IMF's preparation for "assistance" packages for Pakistan. Here's another excerpt from the evaluation conducted in 2002:

"Even internal documents, however, did not go beyond the stage of taking note of past implementation difficulties. The only effort to take stock of past experience and draw strategic orientations for future IMF involvement was done in a 1993 country strategy paper (CSP), but its close links with the briefing paper for the negotiation of what became the 1994 EFF/ESAF limited its "strategic" value, and the lessons it drew from past experience did not appear to be consistently reflected in the design of subsequent programs. No other CSP was prepared since then, even after CSPs were given new impetus in 1997 through guidelines aimed at making them a prime vehicle for staff to step back from the contingencies of programme negotiations, learn lessons from past country experience, and design an optimal strategy for the IMF's involvement in the country."

So, not only does the IMF never really end up being useful for Pakistan, but in fact it mysteriously keeps continuing to engage with Pakistan, even after Pakistan continuously and repeatedly fails to live up to its commitments to the IMF.

Will this time be any different? Of course it will not. The incentives are just too skewed. There are even more Pakistanis at the IMF and World Bank today than there have ever been in the past. They have seen the light. The brilliant career trajectories on offer in this country through the fast stream of international bureaucracy are too delicious to resist. Spend a decade in Washington, DC, pray for a crisis, fly into Islamabad with a "solution," meet a dictator (or a democrat), speak in tongues, and get the job of a lifetime. It has been happening regularly since Ayub Khan. Change, however, is afoot in Pakistan. If you were working as an international bureaucrat, you might have missed the memo. This is a country of 172 million people. Economic crises may scare the super-rich and the elite, but most Pakistanis have nothing to lose. The lawyers know this. So they have lived by the sword, like they too have nothing to lose. The lawyers have inspired a generation of Pakistanis. Rumi is one voice among an almighty opera. A thousand policy memos cannot silence the chorus of change.

In the meantime, it is of course deeply professionally risky for young writers to take on the Washington Consensus, and to write with a lack of the fake and hypocritical "respect" that these IMF uncles have got accustomed to. But it is much more risky for Pakistan to allow these same uncles to continue to peddle the mythology of Pakistan's dependence on the IMF. The destiny and roti of 172 million people dependent on a bunch of suits? That will be the day. The IMF itself knows the value of a good suit. Its own reports and evaluations reject the hyperbole and hyperactivity of these cheerleaders. So should Pakistanis, left of centre, right of centre, and everywhere in-between.
 
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$7.5b from IMF, $800m from US expected

Tareen briefs prime minister on IMF talks

Online

ISLAMABAD: The government has decided in principle to put into practice all three plans A, B, and C to pull the country out of the financial quagmire and a special cabinet session will be held to go ahead with these plans.

Sources told Online that the decision to this effect was taken during a meeting between Adviser to Prime Minister on Finance Shaukat Tareen and Prime Minister Yousaf Raza Gillani at Prime Minister's House.

Tareen gave a detailed briefing to Prime Minister Gillani on the ongoing negotiations with the International Monetary Fund (IMF) and the 9-point agenda for ending the financial crisis, and action taken against moneychangers involved in money laundering. Sources said Tareen told PM that there was a possibility of getting $7.5 billion from IMF in the next few days since successful negotiations were held in this regard.

He told PM that Japan, Canada, the UK and the US would provide $800 million to Pakistan to boost social welfare sectors and other sectors.

He said China, the UAE and Saudi Arabia would help Pakistan overcome the financial crisis, thus providing assistance to Pakistan in the shape of oil or liquid cash and the announcement would be made in this regard at the forthcoming Friends of Pakistan meeting, sources said. He said the World Bank, Asian Development Bank (ADB) and Islamic Bank would also assist Pakistan with more than $3 billion loans.

Sources said Tareen maintained that the government had started work in the right direction and people would see improvement soon. The prime minister lauded Shaukat Tareen's efforts to pull the country out of the crisis and said that the national interest would be held supreme before taking an IMF loan.

The prime minister said a special cabinet meeting would be called for approving the 9-point agenda for ending financial crisis.

Tareen briefed Prime Minister Gillani about the network of foreign exchange smugglers and sought his permission for taking action against them.

PM Gillani said action should be taken against only those against whom there was enough proof and honest businessman must not be harassed. He also told Tareen to draw up strategy to stop this practice.
 
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Haqqani seeks $10b bailout from US

Says Pakistan can't afford military operations

Online

WASHINGTON: Hussain Haqqani, Pakistan's ambassador to the United States, has said a quick infusion of the US cash would ensure that Pakistan will be able to afford to keep up its expensive military operations near the Afghan border.

"All Pakistan is asking for is a bailout of $10 billion to fight terrorism and get back on its feet," he said speaking at the Foundation for the Defense of Democracies, a Washington-based think tank.

Fleeing investors and mounting debts have become serious threat for Pakistan, along with a smoldering insurgency and a history of corruption. Now Haqqani - a former Boston University professor of international relations who became Pakistan's ambassador to the United States in May - is charged with an almost impossible task: trying to secure more funding from the already depleted coffers of the US government.

"Pakistan has many security challenges. It's tough. I'm the man in the middle," Haqqani said, adding that he was frequently criticised in Pakistan for being too close to the United States. "It will take a while before the average Pakistani starts trusting the Americans."

Haqqani is trying to persuade the Americans to fast-track about $1 billion owed to Pakistan for its military operations from April to October. The money has been held up by new Pentagon rules designed to improve accountability, Pakistani officials say.

The latest payment was $364.7 million in September to cover costs for military operations from December 2007 through last March, according to Lieutenant Colonel Mark Wright, a Pentagon spokesman. The Pentagon is reviewing claims for April, and seeking additional documentation for May, Wright said. No further claims have been filed.

Privately, some Pakistani officials warn that the funds must come soon, before Pakistan's economic hardships curb the military operations. But Haqqani issues a more general plea.

"If the world is willing to put the resources into Pakistan, there is no reason why Pakistan is not willing to defeat terrorism and become a more predictable nation," he said.

Zardari to attend interfaith dialogue

ISLAMABAD: President Asif Ali Zardari will attend the UN General Assembly session on 'Culture of Peace' at New York on November 12 and 13. He will be accompanied by the foreign minister. The session is being held at the initiative of the Custodian of the two holy mosques, King Abdullah bin Abdul-Aziz Al Saud of Saudi Arabia. He has been at the forefront of all efforts to promote the cause of global peace and harmony, told a Foreign Office spokesman. Pakistan has always been at the forefront of efforts to promote global peace and harmony among peoples of diverse faiths and culture. Pakistan fully supports the initiative for interfaith and inter-cultural dialogue to promote peace, understanding, and tolerance among human beings, as well as respect for all their diverse religious, cultural and linguistic identities.

Staff Reporter
 
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$7.5bn IMF bailout package on 22nd



Tuesday, November 11, 2008
Loan to be disbursed on quarterly basis

By Khalid Mustafa

ISLAMABAD: The International Monetary Fund (IMF)’s executive board’s meeting, scheduled for Nov 22, is likely to approve a two-year $7.5 billion bailout package under the stand-by arrangement (SBA). The loan will carry 6-6.5 per cent interest against the SDR (special drawing rights) of $1.3 billion to help Pakistan restore financial and economic discipline, a senior government official in the finance ministry told The News.

“Pakistan is to pay $45-50 million more to the IMF apart from repaying principal of $7.5 billion under the stand-by arrangement if the loan is obtained at interest rate of 6-6.5 per cent.” The repayment timeframe, the official said, would be decided by the IMF. However, the official said $7.5 billion loan will be paid quarterly and not in one go. The size of the first instalment may hover around $3-4 billion and the remaining amount would be delivered on a quarterly basis.

The IMF will extend $7.5 billion loan under the newly created short-term liquidity facility (SLF). Under this facility, all the emerging economies with a strong record of implementing rigid macroeconomic policies, but caught up in the global financial crisis, are eligible for loans.

The government of the day is struggling for the said loan by selling the economic performance during the Musharraf regime owing to which the country has been lifted from a low-income to the medium-income country.

Pakistan’s ailing economy, with fast dwindling net foreign reserves that have reduced to $3.4 billion, burgeoning trade deficit of $7.5 billion and 25 per cent inflation, is left with no option but to obtain the IMF loan. So much so Standard & Poor’s—one of the well-reputed rating agencies in the world—has also included Pakistan in the list of those Asian countries most at risk of credit-rating downgrade as the global economy heads into recession and funds become scarcer.

“The IMF loan is the only recipe for Pakistan, keeping in view the bitter facts; otherwise, no one will come to its rescue from being declared a defaulting country.” Prime Minister Syed Yousuf Raza Gilani on Monday allowed the economic managers’ team headed by Finance Adviser Shaukat Tareen to formally place the request with the IMF after failure of two bids by President Asif Ali Zardari to seek direct financial help from China and Saudi Arabia. The federal cabinet in its next meeting will approve the plan to move the IMF.

Under this scenario, Pakistan is to formally request the IMF on Nov 15, seeking 500 per cent of its quota, that stands at $1.5 billion, to bail out its ailing economy. The official said the fund is to accord approval to the said loan for Pakistan on Nov 22 when its executive board’s meeting will be held.

The Friends of Pakistan group have already advised Islamabad to first move the International Monetary Fund to qualify for their formal financial commitments which they will make in a meeting to be held in Dubai on Nov 17.

The top leadership of the country had earlier decided to formally request the IMF after the Dubai meeting of the Friends of Pakistan, but in the new scenario, particularly after the visit of President Asif Ali Zardari to Saudi Arabia, the government has made up its mind to formally move the IMF on Nov 15 to avoid any default-like situation.
 
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