Imtiaz Gul
Right now, the International Monetary Fund (IMF) is forcing Pakistan on its knees like never before. Through its hit-men, the global lender is making sure to degrade the Pakistani rupee to new lows. It also wants to ensure burdening the hapless Pakistanis with additional taxes worth hundreds of billions amid crippling inflation.
What is at stake in return for this havoc with the Pakistani economy ? Release of $1 bn as part of the suspended $6 billion loan facility.
This reminds us of what a former Managing Director of IMF had told an embattled Yanis Varoufakis, the former Greek finance minister.
Wouldn’t be out of place to recalling here an article I wrote for a national daily (Feb 2019) on Varoufakis’s frustrating experience with the IMF.
“You are of course right Yanis. These targets that they insist on cant work,” Christine Lagarde responded when Varoufakis pleaded for softening the conditions of the 1,000 billion Euro loan signed in 2010 by the IMF and the European Central Bank.
“Both Lagarde and [German Finance Minister Wolfgang] Schäuble admitted that the medicine couldn’t work, but they had to administer it anyway. As a patriot, no. It’s bad for your people,” he claims the German having said to him.
Varoufakis had believed the package comprising severe austerity measures and cuts in subsidies for health and education was detrimental to the growth in Greece. Even Greece’s voters rejected it by a comfortable margin but despite that Prime Minister Tsipras caved in to even stronger terms than had originally been envisaged by Brussels. “He (prime minister) followed his usual practice of agreeing with everything I said but drawing the opposite conclusion,” Varoufakis says in his latest book ‘Adults in the Room’.
Yanis Varoufakis’s six-month tenure was a story of almost daily confrontations with the IMF, the European institutions and, most of all, with a German government that seemingly held him in contempt. Varoufakis eventually resigned after six months in office. Why?
He believed that the ‘bailout’ package for the ailing Greek economy was actually a bailout for leading French and German banks designed to prevent them from bankruptcy. The hundreds of billions these banks had lent to Athens had vanished. And, under the European Central Bank laws, the governments were not allowed to rescue financial institutions or pass on bad debts to the central financial institution. So, the German government, says Varoufakis, cunningly ‘cut in’ the IMF to make it look like an international package of ‘solidarity with an EU member’ and imposed it on Greece.
Varoufakis equates global banks, multi-national corporations, governments, and the ‘supranational’ IMF to ‘super black boxes’ run by influential politicians and bureaucrats who are good at converting ‘inputs’ such as money, debt, taxes and votes into ‘outputs’ such as profit, more complicated forms of debt, reductions in welfare payments, health and education policies.
These black boxes are controlled by networks of power comprising their CEOs – the insiders of the system – who decide who to co-opt (such as consulting economists, technocrats) from the outside and who to exclude (such as those who may blow the whistle on their internal machinations).
While reading this riveting book, one could also relate to the conversation in Pakistan during the last few months: those who were presenting a recourse to the IMF as the ultimate cure despite the fact that the loans from Saudi Arabia, UAE and China are cheaper and without conditions, and those advising against funds from the IMF. The former were in a big majority.
The author of this book too propounded that financial entities such as the IMF were instruments for financial enslavement of developing nations, who eventually lose their sovereignty because of the overbearing debt they owe to these institutions. And we still remember how the US Secretary of State Pompeo attempted to leverage his country’s influence with IMF by a warning. “Make no mistake, we will be watching what the IMF does,” he had said in July 2018 in response to reports that Pakistan is planning to request a bailout package of up to $12 billion to shore up its depleted currency reserves and indebted economy.
Are Shaukat Aziz, Shaukat Tarin, Raza Baqir, IMF-linked Pakistani bureaucrats in Islamabad, Dr.Ishrat Hussein, Nadeem Babar the “hit men” that John Perkins had spoken about in his best-seller CONFESSIONS OF AN ECONOMIC HITMAN ? It of course may be subjective and open to debate but how do we escape such conclusions when we judge these technocrats against the disastrous consequences of decisions taken under their lead? In a country where state-run corporations are gobbling up over a trillion rupees a year, the IMF is not bothered at all about creation of new white elephants in the name of authorities and companies in the name of efficiency improvement. These actually are the brain-child of shrewd bureaucrats who nudge their bosses into creating new institutions which can serve them as post-retirement parking lots.
Without enforcing a radical reform of systems within the country, without forcing the FBR to shun the extractive taxation regime of the 19th century, the IMF-led Black Boxes are imposing ever more taxes to secure return of their loans. Unless Pakistan’s leaking bucket – the corrupt FBR and the black-hole public procurement systems are brought at par with those in other countries – namely digitization- no amount of loans could put the country on the way to financial solvency. Enslavement through debts continues. And this too is a tool of coercion into submission.
