Probing into IMF’s program for Pakistan

Very recently, I had the occasion of meeting the current IMF Mission Chief for Pakistan, Mr. Harald Finger in Serena Islamabad to ask him about the essence of the IMF program for Pakistan but habitual of questioning the problem area, I ended up with a round of inquiries reasoning the IMF policies and challenging their theoretical and practical feasibility. Some of the major domains of the argument circled around the following teasers.

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When out of the shady attitude of IMF for the economy of Pakistan, I opted for a mocking question over why IMF always wants a sudden implementation of its conditions, and should it not allow the time for building the capacity to meet the conditions? Also, why it is more sever on its terms and restrictions towards the less developed countries such as Pakistan, when it is felt that it allows more concession to Europe, an example being Greece. When Europe is in crisis, IMF’s help comes readily and its conditions are not very restrictive but in terms of Pakistan it has adopted strict policies of liberalization even with such a bad investment environment, should not IMF focus on protection of industry and give us time to grow? The Chief’s reply was just as sarcastic as is the overall stance of IMF. He said:

“Talk to Greece they will tell you just the opposite and they have a point too. It depends on severity of the problem and the Greek problem is much more severe than Pakistan. We do give time where the situation needs time but some circumstances cannot wait.”

As for the point where I probed into the liberal approach towards Pakistan, he chose to stay on the safe side by agreeing with me verbally in saying that you do not need sudden liberalization and gradual liberalization is what we are focusing on, but obviously I doubt this is how it is in their program too.

The Chief went on to quote Leo Tolstoy while laughing and enjoying his job of controlling the bad economies in saying that ‘All happy families are happy in their own way; all unhappy families are unhappy in the same way’, most countries approach IMF with the same situation of BOP crisis and IMF deals with everyone the same way.

A very typical and layman question I threw at him was simply put as why does IMF  help, why not let a country fix itself because market should, theoretically, adjust itself automatically to which he said that ‘we put an institutional structure in place, not every country can protect itself. It gets ugly for the people. You cannot unbankrupt the companies when they become bankrupt.’ It seemed from his reply that the IMF cared more about the people and multinationals than the BOP or the economy of a country which questions the welfare existence of IMF as a financial institute or is it for matters more related to controlling a country’s policies.

When I commented on the very recent statement of IMF with regard to Benazir Income Support Program (BISP) having found I million more poor people which indicated a sense of pride and relief, he laughed but also said ‘it is not a matter one should laugh at. We have two choices for an economy, private or public, and in Pakistan there are a lot of governance issues, nepotism, we can fix or close companies. It is a very serious issue. The BISP admin faces a lot of challenges in expanding to new households every year. There are a lot more poor people out there. BISP is just a mechanism to find them. Poor people don’t benefit from subsidies. BISP is a way to change that. Instead of a blanket subsidy, we find the poor and assist them.’

When I questioned him if he believes that giving a man a fish is better than teaching him how to fish because social spending programs such as BISP do not increase equality or welfare, then what is the advocacy behind BISP, preference of IMF on cash transfer over skills, which is both theoretically and practically not the right choice as it is not making productive citizens or contributing to the economy in anyway? His reply rather shocked me when he said ‘Personally I see cash transfers better than any other form of development. BISP gives cash transfers and education conditional transfers. BISP amounts are small but atleast it’s a starting point. We are not a development institute. We talk about inclusive growth. But we have this social program for poor for past 20 years, because we realize growth has to be inclusive. The cash transfer of BISP increased by 50% and will increase more… we have to make it bearable for everyone to live.’

When I questioned him why there is such a wide perception gap and if IMF can give us the same lenz with which it sees us because IMF does not seem to consider how the targets it sets for us our achieved, if our government is doing numerical manipulation of stats because there has been empirical evidence on the current government that it has manipulated the figures for growth and production. His reply was once again indifferent and curt ‘We are not auditors frankly!’ Monetary policy is audited by the IMF but fiscal authority is audited by auditor in general. We do take the accusation on figure manipulations seriously. There were accusation of squeezing and stocking on different elements and we always checked. The method to see if government is refunding or stocking something is to see its trend over the year. Such activities show a trend behavior. And we did not find so in any of the points made. However, if such an activity does happen then what can we say, the government itself should be responsible and see what it’s doing.’

When asked about his view on 70 to 80% of IMF money being held with politicians and still IMF gives more money, he was correct enough to say that ‘We can’t say no to corruption or eradicate it, we can minimize the risk of abuse by setting policies of safeguard in a national system’ but I was not convinced by his indifference. If IMF exits to solve the economic problems of countries though customized programs then it must not be so indifferent to the real issues with the economy of that country, even if they are outside of the economic domain of issues, after all, the IMF money  makes each and every person of this country indebted to IMF, if it was lent to solve a crisis issue but was instead eaten up by government officials then IMF cannot get away with saying that their problem ended with lending the money; they must also make sure that the project was completed and audit the cost allocation. But the chief’s reply was ‘There is no mechanism to see if a government is using the money well as you cannot pin money. A gambler can make a 100 excuses while taking money from you that it for his children’s education, for medical reasons or he can say to you that it’s for gambling but in the end he will gamble with it no matter what he tells you.’ As our argument went on on the subject of IMG giving loan on top of loan when government fails to repay and if IMF should still pay, once again I was disappointed to hear him say ‘Government borrows and repays when it is comfortable enough o repay; usually everyone repays and if someone fails to repay it shows that something is wrong with the program and the system and in such a condition we have a choice to forgive and start a new program let them fall! So we give them to time to repay and pay them in the mean time to develop.’ It seems like IMF does not mind a mound of debt on a country and lends anyway which once again challenges the purpose of IMF, whether it is to change the financial state of a country or if it is to make a slave of debt out of that country, because nomatter how philanthropic and warm-hearted the chief made it sound, we all know that IMF is the last organization to be characterized as a charity business. It was very disheartening to see that IMF has no issue with continuous loans when it is aware of corruption and default in the government, such an intention can only be understood in the context of controlling the sovereignty of a country only because it fell into the pit once upon a time from which it never got out because it befriended IMF and then began the lifelong romance of debt and slavery.

When I pushed him to answer me clearly what is his advocacy behind cash transfers and not creating opportunity for the poor from that pool of fund (BISP) and same being the case with loaning even when an economy is not improving enough to be able to pay back, he made it easy for me by generalizing my question as being that of ‘moral hazard’, someone getting assistance and not becoming better! Be it a country or a person under BISP net. His answer, however, once again beats all economics I ever learnt and falls in the radius of welfare economics when he first said ‘In 1998 Korea was under IMF program, today it is a big contributor; in 1998 Pakistan was under IMF program and it still is.’  When he was done laughing on his joke, he went on to close the debate by saying that ‘our program is to provide an opportunity, what the recipient does with it is up to them. Pakistan is as much a member of IMF as another country and if it needs money it can rely on the pool, that’s what we are for. As for BISP, ultimately it’s upto your government .They are your people. It is upto you whether you want to take them along or leave them. But providing a lifeline, an opportunity is important.’

While Mr. Finger left me in the best impression of himself as a good man who cares too much for the poor in Pakistan, it was very clear to me that he was trying his best to justify IMF’s role play, so much that he seemed not to have noticed that the organization he is serving existed to improve the financial crisis and introduce programs for economic uplift; not for social uplift which involve giving Rs1200 to 5.3 million people every month and keep indebting a country till its’ ministry of finance’s sole objective becomes making the IMF happy and repaying the loan when there was a lot more to fix in the economy in the first place.

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One thought on “Probing into IMF’s program for Pakistan

  1. “Accounting terrorism” is the term coined by Dr. Ashfaque Hassan (Economist) on a television program (channel 92) related to budget of this year. He has said that the Finance minister has manipulated the data so much that we have to change the definition of economic growth if we are to rely on the indicators given by Government. Some interesting points in your discussion that why they keeps on giving us and rely on the stats given to them. The fact is Yanks means business and they are doing it with their best.

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