Fears of IMF takeover as Pakistan finalises $6 billion bailout package
The International Monetary Fund (IMF) and Pakistan agreed to terms for a $6 billion bailout package on Sunday amid growing concerns regarding the IMF dictating the financing policy-making in the country.
The fears that the IMF has taken over the Pakistani economy emanate from decisions made in recent weeks, with key economic figures replaced by Prime Minister Imran Khan.
The bailout agreement with the IMF was announced by the PM’s Advisor on Finance Abdul Hafeez Shaikh, who had replaced former Finance Minister Asad Umar after the latter was asked to resign allegedly owing to poor performance.
While the official position was that it was PM Khan who no longer wanted Umar as his Finance Minister, sources within the ruling Pakistan Tehrik-e-Insaf (PTI) and the Finance Ministry revealed that Umar was replaced as per the wishes of the IMF officials.
“IMF officials felt that Asad Umar was not the right man to implement the reforms-laden bailout package and hence wanted to discuss the deal with a person of their choice,” revealed a PTI leader who is also a Member of the National Assembly.
Finance Ministry officials maintain that Abdul Hafeez Sheikh was the IMF’s choice, having previously negotiated a bailout package with the Fund as the Finance Minister of Pakistan under the Pakistan People’s Party (PPP) rule in 2011.
Concerns that the Fund is looking to control the volatile Pakistani economy further increased when the IMF-affiliated Dr Reza Baqir was appointed the Governor of the State Bank of Pakistan last week.
The appointments in the buildup to the IMF agreement were castigated by the opposition parties. PPP Chairman Bilawal Bhutto Zardari criticised the government for succumbing to ‘every IMF demand’ following Baqir’s appointment. Bhutto had earlier mocked Imran Khan for appointing Hafeez Shaikh as his advisor.
Former Interior Minister of Pakistan and senior leader of the Pakistan Muslim League-Nawaz (PML-N) Ahsan Iqbal said that the concerns of the IMF dictating policymaking are amplified by the PTI’s own undemocratic measures.
“If it were a democratic government, it would’ve presented the IMF’s conditions before the Parliament to allow the representatives of the masses to deliberate over it,” he said.
“As things stand, the entire country is concerned about the terms agreed with the IMF and the masses are worried about the volume of taxation that would be imposed on them,” he added.
Further underlining the IMF’s control over Pakistan’s economic affairs, former finance minister Miftah Ismail said the Fund would interfere in Islamabad’s diplomatic and security efforts as well.
“The IMF will look into Pakistan’s progress towards money laundering and efforts to counter terror financing, which means that the Fund will also take decisions of the Financial Action Task Force (FATF) into account,” he opined.
With Hafeez Shaikh expected to announce the annual budget later this month, the deteriorating economic indicators have already jolted the masses. The Pakistani rupee has depreciated by over a third of its value over the past 18 months, jumping from around 105 to the US dollar to the current position of 142. With IMF demanding a free-float of the Pakistani rupee, it is expected to devalue further following the implementation of the reforms affiliated with the bailout package.
Despite minor improvements over the past month, Pakistan’s current account deficit is still $13.6 billion, along with a trade deficit of $26.2 billion. In line with the IMF reforms asking for heavy taxation, the government has recently hiked petroleum prices as well.
Where the opposition parties and critics question the IMF’s ‘creeping coup’, with prices of commodities and taxation expected to further increase in the upcoming budget, many experts believe Islamabad has little choice but to comply. Some say the personnel recommended by the IMF are the ones who are best suited for Pakistan’s crippling economy.
“Reza Baqir is a Pakistani citizen who has great qualifications and experience for macroeconomic management of the economy. That’s precisely what our central bank needed,” said Dr Mohammad Zubair Khan, a former economist at the IMF and the World Bank.
“Also, let’s not forget that around 80% of the IMF programme was agreed before [Hafeez Shaikh and Dr Reza Baqir] took charge and only the remaining 20% has been agreed in recent weeks,” he added.
Political analyst Farrukh Saleem, who briefly served as the PTI government’s Advisor on Economy and Energy, believes the move to bring Abdul Hafeez Shaikh on board is correct.
“He has a proven record of bringing in Foreign Direct Investment, having worked with the World Bank in many countries. Even in Pakistan, Hafeez Shaikh brought in $6 billion when he was the privatisation minister and has successfully ran the Sindh finance ministry,” he noted.