Ever wondered what an economic doomsday might be like? Some might say Pakistan is at its brink and others might shrug it off as a far-fetched idea or may a thing of fiction. However, I believe if Pakistan’s leaders or think tanks continue to follow this path they are on – it is nearer than what most can imagine with consequences far greater!
Let’s analyse the case of the land of Pyramids, Egypt. The IMF had frequently criticized Egypt’s extensive and costly subsidy programs, particularly in the fuel and food sectors, citing their significant burden on the government budget and hindrance to fiscal sustainability. Additionally, the funding body ensured that Egypt adopts a more flexible exchange rate policy to enhance external competitiveness and attract foreign investment, cautioning against fixed or heavily managed exchange rates due to potential distortions in the economy and external imbalances.
Egypt’s economy also faced criticism for its lack of structural reforms, particularly in labour market regulation, the business environment, and governance, which are deemed crucial for fostering private sector-led growth and improving productivity. Now if you were to ask IMF representatives or someone who believes in their economic fixes, they will tell you that Egypt has moved on a path of structural reforms, fiscal consolidation, improvement in exchange rate flexibility and so forth. However, under this beautifully painted economic picture lies the despicable truth of the social impact the fund has had in Egypt.
The social hardships, particularly for vulnerable populations affected by subsidy reforms and austerity measures, are unimaginable.
The social hardships, particularly for vulnerable populations affected by subsidy reforms and austerity measures are unimaginable. The effects of the uneven distribution of gains led to widened income inequality and social tensions. And the biggest question can be placed on the successful implementation of IMF-mandated reforms.
Truthfully, in no real sense can I say that the IMF has been successful in Egypt. The reason is the unwillingness of the corrupt politicians and bureaucrats to truly change their ways similar to what we have witnessed in Pakistan thus far.
Now let’s look at Sri Lanka’s case. Sri Lanka has drawn criticism from the IMF due to its high levels of public debt and fiscal deficits, stemming from unsustainable fiscal policies characterized by extensive government borrowing and expenditure. The management of State-Owned Enterprises (SOEs) in Sri Lanka also comes under scrutiny, with these entities being a source of fiscal strain and inefficiency. Funds recommendations – to enhance the governance, transparency, and efficiency of SOEs, aiming to alleviate their fiscal burden and foster private sector development.
Based only on the case of Egypt and Sri Lanka, If I was to ask about the economic challenges Pakistan faces, anyone would respond with all of them. Pakistan is facing all of the problems that brought these two countries to their knees. Our case is worse and different because we have a lot more to lose. Simply imagine the negative impact IMF-mandate will have on a nuclear power nation. This brings me to the first of my biggest points – Default! One simply cannot close their eyes to the truth.
The truth is that amidst Pakistan’s highly volatile and fragile economic state, the incumbent government is still struggling to justify itself as a true representative of the people. Political instability will have far-reaching domestic and international impacts which we have now begun to witness. The way the stage has been set up and how the Pakistani political actors are operating, default is in our cards.
What will follow default is even uglier. Another IMF program. Yes, a heavily IMF-mandated program that will bring conditions such as a decreased military budget. However, the real objective here is Denuclearization. Pakistan’s nuclear program has always been a reason for concern for the West. Now imagine a denuclearized Pakistan amidst social injustice, inequality, poverty, and economic crunch surrounded by neighbours that it has poor bilateral ties. The wave of rising terrorism is simply an indication towards what is to follow. What would follow is “Dismantling.” God forbids, anything that comes to this.
Every ounce of blood in my body boils as I pen this down but the nonchalant response towards economic urgencies is beyond my comprehension. We are so invested in securing fund after fund that our leadership has closed its eyes to what could happen. Instead, they are falling into this rabbit hole that will only lead to “default, denuclearize and dismantle” – hence the economic doomsday.
Pakistan an economy of 360 billion dollars, with thousands of technocrats and bureaucrats, enormous economic potential is failing at the hands of corrupt and incapable politicians. Today CPEC stands stranded while Iran has prepared itself for economic acceleration Chabahar port is gaining investment. Countless capable economists in Pakistan continue to raise and voice their concerns.
All of my publications and digital content are focused on reformation, SME growth, empowering domestic businesses and more. However, I do not see a light at the end of this tunnel unless we commit sincerely to ensure that this would be our last IMF borrowing.
The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.