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Pakistan's IMF Trap: How Bailouts Are Crippling Economic Growth and Sovereignty

A new report argues Pakistan's economy has become "survivalist," entirely geared toward passing IMF reviews at the cost of long-term health. It highlights a chronic twin deficit, with imports consistently double exports as a percentage of GDP. The analysis criticizes the IMF's rigid focus on revenue extraction, which it claims actively destroys the business ecosystem needed for growth. Ultimately, the report laments a cycle of ambiguous accountability that serves political and international interests over those of Pakistani citizens.

Key Points: Pakistan's IMF-Dependent Economy Remains Vulnerable: Report

  • Chronic twin deficits plague economy
  • IMF policies stifle export-led growth
  • Ambiguous accountability between IMF and government
  • State patronage model led to resource misallocation
2 min read

Pakistan surviving on IMF reviews but economy remains vulnerable as ever: Report

A report reveals Pakistan's economy is trapped in an IMF cycle, prioritizing short-term reviews over long-term growth, eroding its tax base and stifling exports.

"The IMF programme appears unable to distinguish between withdrawing support... and actively destroying the ecosystem required for legitimate businesses to function. - Business Recorder report"

New Delhi, Jan 1

Pakistan is witnessing the institutionalisation of a "survivalist" economy where every policy choice is dictated by the need to pass the next International Monetary Fund review, regardless of whether that policy erodes the tax base for the next decade, while the economy remains vulnerable as ever -- headed nowhere except, most likely, into another IMF programme, as per a news report.

The report in Business Recorder by Shahid Sattar reveals that Pakistan suffers from a chronic twin deficit: a fiscal gap (spending more than it collects) and a balance of payments crisis (consuming more foreign exchange than it earns).

"For fifty years, our imports have hovered at double the rate of our exports as a percentage of GDP. Simply, Pakistan is a country that has failed to produce," it added.

The report argued that the fundamental flaw in the IMF's approach is a "dogmatic adherence to revenue extraction at the cost of value creation".

"By forcing the government to meet rigid fiscal targets, and through any means necessary at this point, the Fund has encouraged policies that stifle the very export-led growth required to break the debt cycle," it further stated.

The historic economic model of state patronage was flawed and resulted in suboptimal allocation of resources.

"But there is a difference between weaning an addict off drugs and starving a healthy person. The IMF programme appears unable to distinguish between withdrawing support and subsidies, and actively destroying the ecosystem required for legitimate businesses to function," the report further argued.

On paper, the IMF deals with the Finance Minister and the Governor of the State Bank. Technically, all policies within the Letter of Intent are the government's own ideas.

"In reality, the programme reflects the behest of those holding the greatest political and economic leverage. When policies fail, the IMF claims the government designed them; the government claims the IMF demanded them. This ambiguity serves everyone but the country and its citizens," the report lamented.

"Unless we reclaim our policymaking from the narrow, revenue-centric confines of IMF programmes, we are not just managing a crisis but rather our own decline," it added.

- IANS

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Reader Comments

S
Sarah B
The line about "starving a healthy person" vs "weaning an addict off drugs" is so powerful. It highlights the fundamental flaw in the approach. You can't just cut and extract; you have to nurture the conditions for businesses to thrive. A sad situation for the common people caught in this.
R
Rohit P
Imports double the exports for 50 years? That's a staggering statistic. It shows a complete failure to build a self-reliant economy. While the report is critical, one must also ask about the role of their own political and military elite in creating this patronage system. The blame isn't just with the IMF.
P
Priya S
It's a vicious cycle with no easy exit. The political blame game mentioned ("IMF demanded them" vs "government designed them") ensures no one is accountable. The ordinary citizen suffers the most with inflation and unemployment. Very tough road ahead for them.
A
Aman W
From an Indian perspective, this is a stark lesson in the importance of economic sovereignty and building a strong industrial base. We had our struggles too, but focusing on 'Make in India' and boosting exports is the only long-term solution. Hope they find a way out, for regional stability.
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Nikhil C
The report makes valid points about the IMF's flawed model, but let's be honest, the IMF is a lender of last resort. The primary failure lies with decades of poor governance, corruption, and prioritizing geopolitics over economics. You can't keep borrowing to fund a lifestyle you can't afford. Tough love is needed, but it must be smart love.

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