The World Bank’s lending programme for the FY03 to FY05 need to be analysed with a view to understand the policy-orientation endorsed by the donors as the new government assumes office.

Since the collapse of the Soviet Union, multilateral institutions have gradually been transformed into instruments of the US foreign policy. The essential concern of the World Bank is to keep a pro-US regime in power. This is reflected in the passionate support of the Country Assistance Strategy (CAS) to the Musharraf government which it credits as having achieved “a remarkable turnaround due to its strong leadership and a clear sense of direction” (P1).

The most important condition attached to the Bank’s lending programme is that Mr. Jamali’s government - which is expected to finalize the Poverty Reduction Strategy Paper (PRSP) almost immediately-includes “committed reform champions at the top and capable reform leaders within the administration” (p33). No wonder two former cabinet ministers have been included in the present set-up.

 Despite the fact that the first Structural Adjustment Agreement (SAA) was signed in 1998 and every subsequent government accepted the IMF/World Bank tutelage the bank describes the 1990s as “a decade of lost opportunities” (Annex. 11 p1). There was a proliferation of madrassahs (p3) intensified “exploitation” of women (p2) insufficient cuts in defence expenditure (p4) etc.

 The Nawaz Sharif government was exceptionally corrupt (Annex 11 p3) presumably because of its refusal to accept the World Bank’s diktat on the IPP issue. Although growth during the 1990s was significantly higher than during Musharraf’s rule (4.6 per cent per annum as against 3.3 per cent) the bank sees Pakistan at the end of the 1990 as, “having extreme vulnerability, a financial crisis and domestic tension”. Enter Musharraf with his new rescue package. The package is not new in terms of its macroeconomic strategy. It is new in that seeks to increase the social embededness of this strategy.

The macroeconomic strategy is the old IMF investment strangulation one, with a drastic fall in public investment, a massive privatization programme, continued de-regulation and reduced protection for local industry. There is to be a continuous vicious jacking up of gas and electricity prices. Privatization and de-regulation in that sector are also expected to contribute to an escalation of petroleum product prices. Large infrastructure projects (specially roads) are to be abandoned. All NCBs are to be privatized. Mergers are to be encouraged to increase the monopolization of the banking industry.

 All public investment in the manufacturing sector is to be phased out and capital goods and intermediate industries are to be strongly discouraged. the justice system is to be restructured to enforce capitalist property rights and contracts. The sort of accountancy and auditing procedures which failed to prevent government collusion in the Enron and the World Comm. Frauds are expected to increase the accountability and integrity of the government. “A new CBR management has assumed leadership” (p1) for this purpose.

“Fantastic” is the only word with which one can describe the World Bank’s expectation that this viciously anti-poor macroeconomic strategy will actually alleviate poverty. But perhaps the World Bank does not really believe this, for it specifies no targets for poverty indicators (head count, gap, gini consumption index, landless rural population ratio) for 2004-2005 (Annex. IV p3).

It’s macroeconomic targets are also modest annual average GDP growth over the PRSP period is targeted at only 4.4 per cent (p5) although the bank recognizes that a 6 per cent annual GDP growth rate is required to have any impact on poverty. The 4.4 per cent PRSP growth target is of course lower than the annual average GDP growth achieved during the 1990s. Private saving is expected to decline from 15.2 per cent of GDP in TY2002 to 14.3 percent in FY04. Gross investment as a proportion of the GDP at end FY2004 is to remain below the level attained in the mid 1990s. The budget deficit is to fall to an all time low of 3.3 per cent. External debt is to be as high as 260 per cent of current receipts.

The bank acknowledges that the debt reprofiling exercise following the September 11 counter attack has been a fraud “Pakistan remains a heavily indebted country despite the Paris club rescheduling” (CAS p30). Total public external debt is expected to rise from $31.4 billion at end June 2001 to $31.8 billion at end FY05. The Bank also acknowledges that the present value of external debt to export ratio will in FY05 remain well above the sustainable debt level identified by the Bank for the heavily indebted countries (HIPCs). Moreover during 2002-05 there are “poor prospects for higher private capital flows to Pakistan”, says the World Bank.

The bank’s lending programme for FY03 to FY05 can only be described as minuscule. The bank estimates that, “current balance of payments projections indicate that through FY03 to FY05 Pakistan will need over $5.7 billion to finance the World Bank reform packages”. Yet the bank is prepared to lend only $600 million over the period under the “low case” and $1.2 billion under the ‘base’ case scenarios. If Pakistan qualifies for the “high” case IDA will provide $1.8 billion and the IBRD will lend an additional $600 million.

There will be no IBRD lending under the ‘low’ case and the “base” case scenarios. Assuming that GDP grows by about 4 percent per year during 2003-05 and gross capital formation stagnates at 14 per cent, the bank “assistance” under the “high” case will amount to only 8 per cent of gross capital formation (at current dollar values). under the more likely “base” case, the bank “assistance” will account for less than 4 per cent of gross investment during 2003-04.

The conditions attached for qualifying even for “base” case “assistance” are formidable. All fiscal and external performance targets must be met, functional reorganization of the CBR be completed, telecommunication sector policy be fully liberalized, the Habib Bank, the KESC and the Faisalabad Electric Supply Cooperation be brought to point of sale, etc.

Under the “high” case in additions to these conditions a Deregulation commission should have formulated laws for the liberalization of the labour market (union bashing) and of the health and industrial sectors. All the SROs should be withdrawn. IT licensing should be fully liberalized. No new tax exemptions or regulatory duties should be imposed. the PTCL, the PSO, the OGDC, the PPL and the National Bank be brought to point of sale. Gas subsidy for the fertilizer industry should be abandoned. 10,000 new lady health workers should have been hired. All these “reforms” should be completed by beginning of FY04 for the IBRD to start lending the paltry sum of $300 million in FY04 and FY05.

The bank’s lending programme in Pakistan has been contracting rapidly. The number of projects have declined from 41 in 1998 to just 16 in June 2002 and outstanding commitments at that date were only $1.5 billion. Pipeline projects have been reduced from 30 to 12. The National Drainage Project has been significantly down sized. The Social Action Programme 2 has been closed with an unsatisfactory rating. The Ghazi Barotha project has been downgraded. The portfolio ‘commitments at risk’ ratio stood at 60 per cent in early 2002.

Fifty per cent of lending under the ‘base’ case and almost 80 percent under the ‘high’ case is dedicated to implementation of Bank suggested reforms. All the IBRD lending is for structural adjustment (SAC III and IV). There is no lending for the manufacturing sector the IFC is pulling out of the cement and textile sectors. It’s total disbursed own account portfolio is a paltry $442.2 million. Almost 40 per cent of this in the IPP companies which are destroying Wapda. The IFC intends to concentrate investment in the financial and health and education sectors and to pull out of manufacturing.

Bank lending has a strong bias against manufacturing. The CAS document rejects the need for adopting a national industrial policy (Annex2 p9). The bank is forcing the government to reduce the maximum tariff rate of 25 per cent in the next budget (Annex II p22) - a move that will cripple industry. The bank seeks to ensure MNC domination over the Pakistani economy by the forced pace privatization of the oil, gas, electricity telecom and financial sectors.

The bank’s domination of the policy-making process has increased significantly since 1988. Pakistan’s failure to develop and to industrialize during this period is a direct consequence of this policy domination. The bank’s policy paradigm - cutting down the size of government, de regulation, privatization, liberalization - has failed catastrophically throughout Africa and Latin America. In a world where the major capitalist economies are on the verge of entering a recession, trade levels are failing and financial flows are contracting, liberalization and reducing government expenditure are suicidal policies.

The World Bank advocates them not because such policies can mitigate poverty - indeed they necessarily exacerbate poverty - but because they serve the imperialist, purpose of weakening the Pakistani state.

The election of an Islamic government in the NWFP provides an important opportunity for rejecting the World Bank policies at the provincial level. The Islamic government must set an example to show that there is an alternative to the continued IMF and the World Bank dominance of the Pakistani economy.