PAKISTAN’S relationship with the IMF cannot be understood without recognising the changing role played by the US — the most dominant country on the Fund’s board with almost 17 per cent of the voting share. It, therefore, isn’t surprising that the fluctuating ties of Islamabad with Washington have had strong bearing on Pakistan’s dealings with the IMF in the past, especially since the 1980s. So, it is not without justification that some see Washington’s desire to forestall any kind of instability in the nuclear-armed Pakistan, at least in the near future as the West prepares to exit the strife-ridden Afghanistan next year, behind the Fund’s approval of a $6.6bn loan on softer-than-usual conditions. Others argue that the world actually wants to help us fix our faltering economy. In these persons’ view, we’re ‘too big an economy’ to be allowed to fail. Reality could lie in a mix of both the factors.
Whatever the reason for the IMF to step forward to help us, it will not give the much-needed dollars for free. The loan disbursement plan has been structured in such a way so as to compel the government to take politically tough decisions such as raising energy prices, restructuring public-sector businesses, broadening the country’s tax base, reducing the budget deficit, and removing impediments to growth such as power and gas shortages. Progress on mutually agreed governance, financial and structural reforms will be reviewed each quarter and future loan disbursement will depend on Pakistan’s compliance with the Fund’s conditions. Implementation of the loan’s conditions will also be necessary to receive more money, even if on much softer terms, from other international lenders to shore up falling reserves and match future debt payments. If anyone amongst the managers of our economy thinks that we can again run away with lenders’ dollars without executing the reforms, he is badly mistaken. The world may be helping Pakistan because of its geopolitical nuisance-value. But it isn’t going to continue to do so unless we also clean up our mess.