Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


‘Voodoo economics’

May 01, 2012

THIS is apropos of Dr Meekal Aziz Ahmed’s letter (April 19) in response to mine (March 30) on Sakib Sherani’s article ‘Voodoo economics’ (Feb 24). Let me respond to the points raised by Dr Ahmed:

He says Mr Sherani has not stated in his letter that Pakistan cannot do without the IMF. Writing almost two months ago when Mr Sherani stated that ‘without fundamental and urgent economic and institutional reform, Pakistan cannot prosper,’ his article was paving the way for a new agreement between Pakistan and the IMF.

This is corroborated by a news item, ‘Pakistan seeks new IMF loan’. A few months before Pakistan seeks a new loan agreement with the IMF, such articles start appearing in newspapers and in talk shows. The same thing happened in 2008. Our sensors have been sharpened as a result of the repetition of this exercise a few months before Pakistan goes to the international financial institutions with its proverbial ‘begging bowl’.

Pakistan’s 2008 agreement with the IMF envisaged a standby arrangement (SBA) for November 2008-June 2010. The IMF suspended this arrangement in May 2010 after Pakistan missed implementing various economic reforms.

We, therefore, need to evaluate the different performance indicators during the 2008-2010 to gauge whether the IMF improved them. Fiscal deficit figures for this period are FY 08: 7.6; FY 09: 5.3; FY 10: 6.3. If the IMF turned a blind eye to the government’s extravaganza (a fact acknowledged by Mr Sherani ), it does not mean Pakistan was not on the IMF programme.

Dr Meekal says targets were missed and the government sought waivers because of floods. We must know that the weather cycle is predicted to be repeated for four more years.

The prevailing exceptional circumstances in Pakistan will make the implementation of the conditionalities in the next IMF agreement impossible and the agreement will fail just as eight previous ones, out of a total of 11 have failed.

I didn’t accuse Mr Sherani of being a fan of the Musharaf government. I have merely differed with him on the Mushraf era. I think the best of times were the 1960s when all sectors grew rapidly and people were prosperous. But of course this is a matter of opinion. And I agree that, by and large, the economic conditions have worsened now as compared to any other period in the history of this country.

According to the information I have, India has not been a frequent user of IMF resources. It sought help from the IMF for balance-of-payments support on just a few occasions.

In 1981-82, it borrowed SDR 3.9bn under an Extended Fund Facility.

In 1991-93, it borrowed SDR 2.2bn under two standby arrangements, and in 1991 it borrowed SDR 1.4bn under the Compensatory Financing Facility.

More recently, when it needed support, it decided to go to non-resident Indians rather than to the IMF. That is why India conducts itself as a sovereign country. It also has the most protected economy in the region which, according to a recent Financial Times, reminds one of the protectionism of the 1970s.

Having been with the IMF for several years, if Dr Meekal has any further information on India in addition to what I have stated, he should share it with readers.