In his column in Dawn, Akbar Zaidi argues against the need for further IMF loans for Pakistan:
At the moment, Pakistan’s foreign exchange reserves, which include previously lent IMF money, are sufficient, and while some international payments need to be made in the near future, adding more loans is certainly not the best way forward for an already heavily indebted country. What Pakistan’s economy needs is some clear thinking about substantial structural reforms based on the consensus of political actors. For this, one doesn’t need the IMF.
And where does Mr. Zaidi think this clear thinking will come from? One source he highlights is the current finance minister, Dr. Abdul Hafeez Shaikh. Soon after, however, he explains the political dimension of economic policymaking in Pakistan and the unwillingness of elected parliamentarians to heed the finance minister’s call for fiscal reform and make the hard decisions. Regardless, he continues to argue:
There is a long to-do list, which the Pakistan government and its finance ministry need to follow through, one by one, preferably through political consensus. One doesn’t require the IMF to advise the Pakistan government that it needs to raise taxes on untaxed incomes to address numerous shortfalls which affect the economy.
I wonder, though, whether the IMF does not play an important role. Not an advisory one – which it does and Mr. Zaidi argues is often unnecessary and sometimes pernicious – but a regulatory one. Is it not useful to a citizen who has to choose between various economically illiterate and fiscally irresponsible options for government to have a global police officer to enforce some discipline?
I am not naive enough to assume that the IMF’s objectives are always in the short-term advantage of the borrowing country, or that their economic models are always tailor-made for local conditions. But if we were not in a fiscal mess in the first place, we would not need to be seeking help. Beggars cannot be choosers.
Which brings us to Mr. Zaidi’s argument that we have enough foreign exchange reserves to be comfortable without further IMF assistance. We should not be beggars, in other words. We actually have enough. This appears to assume that either our fiscal problems are a one-off (will the circular debt disappear if we pay it off once? Will we not have a fiscal deficit every year for the next few years?), that these reserves are available to us for use for plugging fiscal holes (what happens to the PKR-USD parity if we use up, say, $5billion? $3billion?) or that our government will make the right fiscal and economic decision.
In a democracy, good technocratic advice depends on how politics plays itself out, and economic decisions will always be based on political choices and their consequences. One doesn’t need the IMF to solve Pakistan’s economic problems, one needs competent political leadership.
And if we do not have ‘competent political leadership’?
You can read Mr. Zaidi’s article here.