In the past few years we have witnessed that Pakistan has become used to live on borrowed money. The country asks for money to rich countries like United States and China. When the money borrowed from these countries is not enough for survival of the country, they move to international organizations like IMF. For years the country has used its strategic geopolitical location to get money from United States. Pakistan has become a pawn in the hands of US in its proxy war with USSR. For years, US pumped billions of dollars in Pakistan as financial and military aid. In the post-cold war world it allied with China due to their mutual fear of India. But as economic clout of China grown over the years, the relationship of equals became like that of a colonial subject and master.
The foreign money has helped Pakistan live beyond means. The country faces typical debt problem where government spending exceeds revenues and imports outpace exports. Pakistan has foreign exchange only to support two months of imports and that too due to loans from Pakistan. As the country faces another balance of payments crisis, the government has decided to move to International Monetary Fund to seek help. The bureaucrats of the country has prepared plan for 12 billion dollars help from IMF. If the country succeeds in negotiations with IMF, this would be the thirteenth bailout package for Pakistan since 1988. The country has taken 12 bailout package from IMF in the last three decades despite consistent monetary help from US and China in form of military and financial aids. Neighboring countries India, Bangladesh, and Sri Lanka has taken substantially lower number of bailout packages in the same period with India having only two both during 1991 financial crisis.
The timely bailout packages and foreign helps never forced Pakistan government to take structural reforms to solve the chronic diseases of balance of payments. Whenever there was an economic trouble, country used its strategic location to seek financial help from foreign countries which were ready to help given the country agrees to become pawn to them in their foreign affairs strategy. This time Trump administration has decided to cut military and financial aids to the country and it had already taken successive loans from China. Therefore now IMF must put tough conditions for this financial package. Until and unless Pakistan government goes for tough structural reforms the situation will not improve. The country has already got tonnes of money from financial institutions and countries but condition is same in the last seven decades.
The military and political elites of the country use the aid money for personal benefits like African military generals. The country’s economy is suffering from what is ‘Dutch Disease’, the continuous influx of foreign money has destroyed the domestic industry and overvaluation of domestic currency. The foreign money used for cheap imports from countries like China which is its largest trading partner. For example China Pakistan Economic Corridor (CPEC) has pushed imports and trade deficit from China substantially up. Domestic industries of Pakistan could not build capacity to compete with foreign imports and this is what hurts Chinese economy most. IMF must save Pakistan’s economy from countries military and political elite for improvement. In fact, IMF had to micromanage Pakistani economy if the institution wants bailout package to be fruitful.
Get real time updates about our posts directly on your device