Pakistan has been suffering from economic crises since its inception. There are various reasons behind the plight of Pakistan economy mainly corrupt government and leaders, lack of strategic financial policies, lack of education, lack of exports and large number of imports, deregulation of financial institutions, terrorism, power crises, political strife and much more. To keep the balance of payments in check and to meet the financial obligations, the government of Pakistan has unfortunately always resorted to taking loans. This is where IMF, ADB and other such institutions come into play in Pakistan’s economy.
The aim of the IMF is to promote international trade and monetary cooperation and also the stabilization of exchange rates. Over the past years, the International Monetary Fund (IMF) has emerged as a key player, which has greatly influenced Pakistan’s macroeconomic policies. Since the late 1980s, it has been imposing various conditions on many governments who have been greatly crippled by debt servicing, including Pakistan.
The purpose of the government of Pakistan to take loans from the IMF was to stabilize the deteriorating economy and exchange rates. IMF provides huge amount of loans for such purposes, which seems very lucrative and attractive offer at first sight from a short-term perspective. However there is no free lunch. IMF provides loans in exchange of many demands and conditions, which are to be fulfilled to get the loans. Typical IMF conditions comprise contract based macroeconomic policies (fiscal and monetary), inflation targeting policies, financial deregulation and increased openness to international capital flows, trade liberalization (including reduction of tariff and nontariff barriers) and privatization of public-sector enterprises.
In short they actually capitalize all the major sectors of the country and make sure that the country will never be able to get out of their hands. For a country like Pakistan these severe and rigid conditions are bound to make them the permanent slave of IMF. They dictate their own terms and policies in exchange of every loan, which increases the deterioration of the economy and exchange rates rather than stabilizing it. Ideally, huge loans from IMF should have stabilized the Pakistan economy and balance of payment by now but the condition of the economy and exchange rates are not even close to getting stabilized.
Why is taking huge loans from IMF not paying off? The answer is somehow not getting into the mind of government policy makers. G8 countries are controlling IMF. They have made conditions and policies, which are according to their own economic conditions. They are very developed, advanced and educated countries. They cope with all the terms and conditions of IMF quite easily. However, under -developed countries like Pakistan have limited resources and lack of strategic policies. They easily become victims of severe terms and conditions and lose everything including their sovereignty and control over state. The condition of Pakistan’s economy is a stark example of what happened to underdeveloped countries that made the grave mistake of taking loans from IMF. So what can we do to stabilize our economy without taking loans from IMF? The answer is that we really need to stop being a slave of IMF. We need to stop relying on them. We need to amend our policies. What we really need is honest and well educated people at the top level who can make effective and viable strategic policies to overcome the budget deficit without taking loans. We need to increase our exports. We need to be self-sufficient as loans are no more the solution of stabilizing the economy. They will only put more weight on our already crushed economy.
With effective utilization of resources, honest and educated loyal leaders and effective strategic policies, there is no way we cannot improve our economy and exchange rates. Soon we could be in the list of developed countries but only if we say goodbye to IMF and really start working to improve our economy in a self-sufficient manner.