On August 31, 2018 the then finance minister Asad Omar placed an eye-opening document on Pakistan’s debt liabilities before the Senate. It included details of the foreign multilateral, bilateral and commercial loan liabilities.
This annex largely went unnoticed or perhaps was consciously ignored by the mainstream media because of its strong nexus the most powerful proponents of the country’s status quo.
Interestingly, this document also contained information on loans from the International Monetary Fund (IMF) and raised a basic question:
Why have the PPP and PML-N governments been blowing the trumpet about “successful completion of the IMF “ programme? What qualified as “successful completion” when the principal remained intact even beyond the life of the loan period.
And, more interestingly, how did IMF big-wigs define “success” when Pakistan’s government lived off “waivers”, and dragged feet on the reform of the profusely bleeding financial system?
Where did the IMF loans go? Or did the IMF acted as complicit hit-man in covering up massive financial misappropriation of the precious public funds and borrowed billions of dollars?
Let us see what that document said; out of the nearly $ 70 billion as of June 30, 2018, the IMF total loan stood at $ 14.28 billion.
Interestingly, the Pakistan owed $3,937 billion to IMF between 2004-2009. The year 2009 was indeed the first for the 23-month $ 7.6 billion Stand-By Arrangement the country had agreed with the IMF on November 24, 2008.
The total owed to IMF rose to $ 7.45 billion in 2009-10 and shot to $14.28 in 2015-16 as a result of the $6.6 billion 36-month loan under the IMF’s Extended Fund Facility approved in September 2013.
A whopping 14.28 billion dollars within seven years – as evidenced by the Ministry of Finance document that Asad Omar presented in the Senate.
Both – the PPP and PML-N – governments bragged to the nation about this loan management and claimed to had broken the begging bowl (Kashkol tor diya). So did the IMF, without telling Pakistanis that almost the entire loan taken between 2009-2015 is still outstanding and in fact been topped up with the latest $ 6 billion that the Fund is providing to the government.
As a whole, reckless spending by the past governments, short-sighted policy options and the rulers’ refusal to structural reforms have landed Pakistan in a grave debt trap, with the foreign loans/liabilities close to a staggering $ 104 billion.
According to economist Dr. Talat Anwar, Pakistan has to pay back $37 billion to both bilateral and multilateral creditors over the IMF program period, 2019-22. Out of the total repayment, Pakistan will have to pay back $14.7 billion to China as repayment of bilateral and commercial debt during this period.
This also means, the total external debt servicing in the current fiscal year 2019-20 alone will be a crushing almost $14.9 billion (or 62 percent of exports earning), increasing the vulnerability of the balance of payment account.
The increased borrowing from China, both CPEC-related and commercial, of over $8. billion has important implications for debt sustainability, according to Dr. Talat Anwar. In 2018, China also provided an additional $2 billion for balance of payment support to take the official loan to $ 8.33 billion.
This grave situation demands questions: If we took the loan in the name of reforms, did reforms happen and did IMF have a means to check as to how the IMF and World Bank funds were used – if at all? Did the governments comply with the program, and if not how did they provide a clean chit to the two governments?
The defenders may respond by saying the funds were for interest and principal repayments.
What are then the exact details of interests paid and repayments made. Where are the records for disposal of these funds?
Concerned officials point out that the real secret lies between remittances/loans received and debt servicing during the tenure of the two former governments.
It would be therefore good – even if for academic learning – to call out leaders of the previous two governments to figure out inappropriate use of foreign loans that have now ballooned to 104.
It is irrésistible to recall what Yanis Varoufakis, former Greek finance minister, holds of the IMF.
In his book “Any Adults in the Room” 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), he argues.
Varoufakis propounds that financial entities such as the IMF were instruments for financial enslavement of developing nations.
Can some one sum up the courage to confront the IMF for collusion in stone-walling structural reforms in Pakistan and piling debt mountains on its people?
This article first appeared in Matrix Mag and is being reproduced under a special arrangement. Click here to go to the original