There is no need to go into the details of the folly of getting higher growth though the money-pumping policies of the Musharraf government. But it was all done with the blessings of the World Bank and the IMF
It is difficult to decide what is more significant: Mr Asif Ali Zardari’s ascendance to presidency or re-entry of the International Monetary Fund in Pakistan. President Zardari’s era is yet to unfold but there is a long record of consequences of IMF intervention in Pakistan. I have no clue as to why Pakistan’s economic managers always reach the conclusion that the World Bank and the IMF will deliver prosperity to Pakistan: it has never happened and chances are that it may never happen ever.
A few days back, Prime Minister Yousaf Raza Gilani defended increasing electricity prices as accepting an IMF demand. Instead of being embarrassed of caving in to external pressure to make a change that will adversely affect the poor people of Pakistan, he was treating IMF diktat as heavenly scri pture. As a matter of fact, Pakistan’s ruling elite is so uninformed and indifferent to the common citizen’s problems that they cannot see the negative impacts of World Bank and the IMF policies.
One does not have to go very far to unmask the IMF’s damaging and hypocritical treatment of Pakistan. Before 9/11, every IMF technician was up in arms to cut all kinds of assistance to Pakistan. However, when the White House sent orders via the US Treasury Secretary — the real string puller behind every IMF decision — Pakistan’s status at the IMF and the World Bank changed overnight. Every area manager started to outdo the other to come up with a bigger aid package for Pakistan.
Pakistan’s economy was made viable by disaster-prone economic policies from 2001 to 2007, pursued under the nose of the IMF. As a matter of fact, the architects of a bound-to-fail economic strategy were received and adored like heroes; they were taken to be theoreticians of Adam Smith’s stature.
The economic policies of Musharraf era had started failing in 2006 when the inflation rate started rising and economic mangers had no tool to control it. By 2007, much before the caretaker government took over, the inflation rate was in double digits and foreign exchange reserves were already down by four billion dollars. Therefore, the present woes of Pakistan’s economy have nothing to do with the present government or the caretakers: its genesis lies in the policies pursued during Shaukat-Ishrat-Musharraf era.
The question is: where was the IMF in these years? Was it not looking at the real story behind the fake growth rates Shaukat Aziz was churning out every year? How could the IMF miss the point that if growth rates are achieved by merely increasing money supply and unchecked speculation in the real estate and stock market, the economy will collapse at some point?
Even less informed economists like me were aware of the pitfalls and were pointing out the perils of such an approach over and over. But no one was paying attention because the World Bank and the IMF were issuing a ‘fitness’ certificate at every bi-annual meeting.
Either the IMF’s economic experts were incompetent despite their degrees from the world’s most valued universities or they were going along with the US Treasury Department’s politics, ultimately dictated by the White House. Probably, it is a case of incompetence and political expediency as well.
The World Bank and the IMF were mesmerised by the growth numbers coming out of Pakistan and were not willing to challenge the White House’s blue-eyed boys. The World Bank and the IMF have a long history of looking at economic growth within narrow parameters and toeing White House diktat.
As matter of fact, Shaukat Aziz and Ishrat Hussain were following the World Bank and IMF pre scri ption. Ishrat Hussain was a career bureaucrat from the World Bank and Shaukat Aziz had made his career at Citibank. Ishrat Hussain had the wrong kind of expertise in running the economy of a country and Shaukat Aziz was nothing more than a banker. Both were addicted to short-term and shortsighted policies.
Besides the role of specific persons or managers, the World Bank and the IMF policies failed miserably in South and Latin America. I remember an encounter with Pakistan’s ex-caretaker prime minister, Mr Moeen Qureshi, who had retired as the senior vice president of the World Bank. Mr Qureshi was running an investment fund which was highly invested in South America. He was up in the clouds about prospects of South American economies, and had no clue that it would be collapsing shortly. It did collapse and the region only emerged from the crisis after they decided to cut-off all links with the World Bank and the IMF.
There is no need to go into the details of the folly of getting higher growth though the money-pumping policies of the Musharraf government. But it was all done with the blessings of the World Bank and the IMF.
And the present government is again inviting these institutions to ‘rescue’ the economy.