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Deepanshu Mohan's article dissects the perennial issue of IMF bailouts to Pakistan, highlighting the stark absence of accountability and the entrenchment of systemic dysfunction. The piece opens with the recent approval of Pakistan's 24th IMF bailout, a $1 billion disbursement under the Extended Fund Facility and $1.3 billion from the Resilience and Sustainability Facility, against the backdrop of India's abstention, citing concerns over Pakistan's alleged involvement in terrorist activities and the potential misuse of funds. This sets the stage for a critical examination of Pakistan's long and troubled relationship with debt and the role of international financial institutions in perpetuating a cycle of dependence. The author skillfully portrays Pakistan as a gambler perpetually relying on borrowed chips to cover past losses, a metaphor that underscores the unsustainability of the current approach. The IMF's reluctance to declare Pakistan's debt unsustainable, fearing it would deter other lenders, further exacerbates the problem, pushing the burden of this strategy onto the Pakistani populace. The article drives home the point that the true cost of this 'extend and pretend' approach is borne not in the halls of Washington, but in the streets of Karachi, Lahore, and Quetta, where essential social services are neglected due to the overwhelming burden of debt repayment. The staggering figures of Pakistan spending approximately 65% of its tax revenue on interest payments, while allocating a mere 1.7% to education and 0.8% to health, paints a grim picture of skewed priorities. The stark contrast between debt servicing and investments in human capital development exposes the fundamental flaws in the system. Comparing Pakistan's Human Development Index to that of Bangladesh further highlights the nation's developmental lag. Highlighting the literacy rate being at 60% and a high child mortality rate of 67 per 1,000 births, the article underscores the dire consequences of neglecting social sector investments. The piece then delves into the effectiveness of aid and development assistance, referencing Craig Burnside and David Dollar's research, which emphasizes the crucial role of institutions and policies in determining the impact of aid. The authors argue that in countries plagued by corruption and institutional failures, a significant portion of aid is squandered, thus reinforcing the point that simply injecting funds into a dysfunctional system is unlikely to yield positive outcomes. This section further underscores the strategic considerations, where the US often influences aid distribution for its own geopolitical reasons, even if these funds don't directly contribute to developmental objectives. Moreover, the piece delves into the fundamental question of whether Pakistan's resources are being spent on guns or growth, a dilemma that becomes increasingly acute with each new loan. The IMF's latest bailout aims to provide fiscal oxygen for growth, but this objective is contingent on the presence of robust and effective institutions, which Pakistan has lacked due to the long-standing power struggle between the army and the elected government. This internal conflict undermines the objective functioning of the state and hinders efforts to promote transparency and accountability.
The article further examines Pakistan's defense spending and its broader economic implications. It acknowledges that while defense allocation has decreased as a percentage of GDP compared to 2020, it still consumes a significant portion of the national budget, exceeding allocations for crucial sectors like healthcare. The article highlights a 2024 Human Rights Watch report, which reveals that Pakistan spent significantly more on servicing its external public debts than on healthcare in 2021, further emphasizing the skewed resource allocation. The discussion then shifts to the extensive economic activities of military-affiliated entities such as the Fauji Foundation, Army Welfare Trust, and Shaheen Foundation. These organizations operate across various sectors, often outside the scope of civilian audits, raising concerns about transparency and accountability. The formalization of the military's economic power through the establishment of the Special Investment Facilitation Council (SIFC), chaired by the Army Chief, is also discussed. While intended to attract foreign investment, the SIFC's success has been limited, with foreign direct investment lagging far behind that of India. The article criticizes the IMF and World Bank for their alleged complicity in perpetuating the cycle of dysfunction, not through malicious intent, but through a lack of attention to the structural issues plaguing Pakistan. Loan conditions often target measures like fuel subsidies, civil service pensions, and tax reforms, which disproportionately affect the public, while the military budget and its economic activities remain untouched. The article argues that the military's budget is considered sacrosanct and its political power remains unchallenged, hindering efforts to implement meaningful reforms. The ousting of Imran Khan and the subsequent political maneuvering have only reinforced the army's grip on civilian institutions. This section emphasizes the importance of addressing the power dynamics within Pakistan to achieve sustainable economic development and ensure that resources are allocated effectively. The persistent influence of the military in both political and economic spheres poses a significant obstacle to genuine reform and accountability.
The article concludes by highlighting India's abstention on the IMF vote as a signal of growing unease within the international community regarding the continued funding of a regime where strategic priorities overshadow systemic reform. India's protest, triggered by the Pahalgam terror attack, underscores the broader concern that IMF funds often bypass accountability mechanisms. The article points out that the IMF's own reports hint at 'geopolitical considerations' influencing fiscal decisions, suggesting that Pakistan's strategic importance may be prioritized over fiscal rigor. The author draws a parallel to the 2024 riots in Kenya, where IMF-backed reforms triggered violent protests and eroded public trust, cautioning against the potential consequences of austerity measures without addressing underlying governance issues. The article emphasizes that the IMF's credibility is at stake, as it is increasingly perceived as a lender that props up regimes that suppress dissent rather than deliver reform. The World Bank faces similar challenges in countries where entrenched elites prioritize control over change. The author argues that the implications extend beyond economics to strategic considerations. India's rare protest marks a turning point, suggesting that the international financial system can no longer afford to bankroll dysfunction in the name of stability. The article concludes with a call for the IMF to prioritize accountability and address the cost of misgovernance as it prepares its next disbursement to Pakistan. The author emphasizes that the true test for the IMF lies in recognizing and addressing the structural issues that perpetuate the cycle of debt and dependence, rather than simply providing temporary financial relief. By highlighting the need for systemic reform and accountability, the article underscores the importance of addressing the root causes of Pakistan's economic challenges to achieve sustainable and equitable development.
Source: As the IMF bails out Pakistan yet again, accountability is the casualty