The things in Pakistani politics are always uncertain and unclear; the system is struggling hard for democratic values, in the shadows of feudalism, chaos and family politics. People are kept under informed about the reality. All of this helped populism to enroot in Pakistani political sphere along with the idealistic approach. Due to political instability and lack of leadership Pakistan is facing serious problems in developing long term policies in any sector.
During the PMLN government, when they went to IMF for bailout, current finance minister Asad Umar went to twitter describing the move as a result of “lack of strategic direction.” Furthermore said that “IMF is complicit in elite capture of Pakistani economy”. Before coming toward the real issue let’s talk about what Imran Khan said about IMF “Every country I know that has IMF or work bank programmes has only improvised the poor and enriched the rich” Now considering IMF as the final resort to strengthen the falling economy, government has officially approached IMF for bailout package. But the problem is not the lack of direction as described by finance minister, this is not the first time Pakistan approached IMF; we on every crucial movement went to get the bailout describing it as final resort for the last time. This whole theory of strengthening economy never worked for Pakistan because IMF comes with certain terms and conditions mostly decreasing the spending on public sector which impact the whole social, economic policy of the government. The economic policy is altered by reducing spending on health and education moreover that country is left with no other option than to increase public taxation (mostly indirect) in order to repay never ending debts to international banks. The program also insists the countries for privatization of state owned corporations like natural resources, transportation, and telephone most often foreign investors are welcomed to buy these corporations, which in longer term give control of state owned enterprises in the hands of private corporations.
The case of Venezuela is prime example how a country’s economy having one of the largest oil reserves collapse even after having the IMF programmes for years. The credibility and capability of IMF programmes is also a controversial topic because the programme failed to stabilize the economy of even those countries who successfully implement the structural adjustments, many among them failed to overcome currency depreciations including Greece and Indonesia. According to “International Journal of monetary economics and finance” research report on IMF programs in almost 130 countries 1975-1999 countries which went under IMF loans economy went to decline. So why it is considered as the only solution even after having the long-term disadvantages insight. According to the last year budget Pakistan overall budget deficit- (the gap between income and expenditure) – widen to 4.3 % of GDP about R.s 1.481 trillion. But for the budget 2018-2019 the budget deficit is R.s 1.607 trillion or 30.7 % has been earmarked for debt serving. Taking more loans will increase the deficit in the coming years. In July, Pakistan’s central bank foreign reserves dropped sharply by $601.8m to just $9.6bn, which is enough to cover just two months of imports. But the most important thing about receiving an IMF loan is the restriction of agreement to maintain free convertibility of its currency regardless of the exchange rate which will impact the value of rupee, propositionally the value of dollar will increase along with the amount of debt. Even tough if the government manage to improve economic growth, the rise in fiscal deficit will impact the growth in longer terms. Just like the economic policy of last government, current government economic policy is short termed, where no long term goals and objectives are defined.