Guest post by A.H.Kalwar of Pakistion Blog
Russia is the largest borrower from the International Monetary Fund (IMF). The initial objective and promises by IMF were to quickly bail Russia out of an economic crises, and throw it back on track. Today Russia’s debts to the IMF are so big that the only way to ensure repayment is to keep borrowing more. This summer alone $4.5bn have been borrowed entirely for minimum repayment of previous IMF loans.
A brief look at institution’s like the World Bank and IMF rings loud bells. The constant failures of such institutions have elevated poverty, widened the wealth gap, while corporate profits sore. The joint economic comity of the U.S. congress admitted that there is a mire 40% success rate of the World Bank. Even that is an exaggeration.
Pakistan is IMF’s next target, while President Zardari and Prime Minister Gilani keep on insisting that they will not accept IMF’s tough conditions and are negotiating them down to a reasonable level, it is highly unlikely.
Whenever a government takes up and IMF loan it is one of the following cases; ‘One’ it has already defaulted and failed, something which Pakistan is far from being. ‘Two’ the leadership is either corruptible or a U.S. puppet.
While it is too soon to predict what the final conditions will be, they will most certainly be along the following lines.
- Currency Devaluation
- Privatization of critical state assets.
- Excise Duty on services and agriculture sectors.
- Reduction in defense budget
- Reduction in Development expenditure
- Increased general taxes
- High level IMF involvement in state economic affairs, including the appointment of key government personnel.
- Cuts in education and health care programs.
- Changes in foreign trade policy.
- High annual interest
In simple words, a further 15-20% of Pakistani popullation will be pushed under the poverty line. Our economic growth will be hampered, including a critical hit to the agricultural sector. We’ll be caught between the ever so popular “Vicous IMF cycle”, of further loans, and prolonged repayments.
Furthermore, IMF’s influence will not be confined to the economic side of our nation. It will systematically creep into social, political and other arenas as well. While U.S. already has more say power than our President himself over Pakistan, increased U.S. influence is a nightmare.
This certainly is not an helping hand.