There was nothing path-breaking or particularly original when I wrote the following a couple of days ago in the context of Pakistan reaching out to the International Monetary Fund (IMF) for a bailout.
Going to the IMF is always a difficult choice for countries because the institution is known to set tough reform conditions before releasing any money. We do not know yet what conditions the IMF might insist on to lend Pakistan $8 billion but one can say reasonably that they would be quite tough and not politically palatable for the nascent Khan government.
Imposing tough reform and austerity conditions is part of the IMF’s standard operating procedure.I describe it as “those who lend you, bend you.” This is as true for countries as it is for individuals. I know because I have been in it for a long time. I say this not as a complaint but just as a matter of fact. No money has ever come to anyone—individuals or countries—without strings attached to it. This is my version of the string theory. (Nerd humor).
Now that Islamabad has formally begun negotiating a $12 billion bailout, as opposed to the initially believed $8 billion, the demands of IMF lending and pressures of political expediencies will head for a head-on collision.
As Maria Abi-Habib reports in The New York Times today, Pakistan actually needs $20 billion. It is baffling why it is not asking for that amount unless it plans to meet the shortfall from friendly countries. Like I said, money means strings even with friends.
The problem with the IMF bailout, which is the only reasonable option for Khan at this point, is that he cannot accept it and keep his election promises too over a long-term. The IMF would insist on seeing Pakistan’s books. IMF managing director Christine Lagarde has already called for “absolute transparency” over its debts before she opens her purse strings. For a government like Pakistan’s “absolute transparency” could be tricky because there is so much juggling that must happen behind-the-scenes.
However, the more formidable problem in opening up the books is that China, a top benefactor of Pakistan, will not like that because Beijing too has its own complex juggling as it goes about hooking up nation-states on debt addiction to advance its long-term strategic goals.
Khan ought to be acutely conscious that barely two months into his government and he is already feeling the severe economic squeeze from the IMF that would necessarily push him off his lofty but unrealistic objectives. One can’t be in debt and still dream. Ask me. I know. I mean one can dream but that would be ludicrous. Debt devours nobility. Dreams die at debt’s doorstep.
The Pakistan-IMF story has just begun to unfold. I will be watching.