When, in a flush of new-found economic maturity four years ago, we told the IMF that our future financial needs would be met primarily from domestic and international markets, we ticked the number of IMF-specific benchmarks we had been able to attain between 1998 and 2004. Then why should we have gone so horribly wrong yet again?
WE hare been colonised by every power that matters -- the Mughals and the British, military regimes and pseudo-parliamentary governments. We must now prepare ourselves for a long period of occupation by international financing institutions.
The Mughals gave us imperial cohesion and a land revenue system; in return we gave them absolute power to rule uninterruptedly for 350 years. The British, over a hundred years, gave us English, a judicial system, the steel framework of a bureaucracy, and nabobs like Warren Hastings; in return we surrendered to them our liberty and our natural resources.
Military regimes for thirty-three years gave us authoritarian rule, botched attempts at reforming governance, and assurances that democracy could be delivered only by midwives in khaki; in return we gave them our obedience and our Samson-blind trust
For the remaining twenty-eight years, we gave pseudo-parliamentarians our votes; in return they have given us empty promises and left us with even emptier coffers. Now we look to the neo-colonialist IFIs for financial succour. We want them to lend us billion of dollars and provide a semblance of solvency, in return, we may have to pledge ourselves to a long sentence of fiscal servitude.
An apprehension has been nurtured in the minds of our public that an approach to the IMF will be akin to the surrender at Dacca Racecourse in December 1971 .We recovered from that ignominy, just as France did from its capitulation to Germany at Compiegne in 1940.
More recently, in the 1990s, Brazil and Mexico recovered from their economic crises. We, too, should be able to emerge from our present maelstrom. It is often easier to weather a storm when one is already within the eye of it.
Let us examine our relationship with the IMF before we pass judgment on the IMF, or on ourselves. The IMF provides a range of loans (euphemistically described as "facilities") that can be either on concessional terms or at market-related interest rates. The first category includes Poverty Reduction and Growth Facility (PRGF) and Exogenous Shocks Facility (ESF), i.e. those factors that are outside a country's control. The period of such facilities can be between 5 to 10 years and carries a sweetheart rate of interest of 0.5% per annum.
The second category includes Stand-by Arrangements (SBA) and Extended Fund Facility (EFF). These are shorter in duration. The SBA is for 12-24 months and the EFF lasts
usually for 3 years. Because of this, they carry a higher, market-responsive rate of interest.
Currently, Pakistan has availed a PRGF loan of $1,033 billion, sanctioned by IMF in December 2001, out of which $861 million had been drawn-down. Before the facility could expire in December 2004, our financial health had so improved that we wrote to the IMF on November 12,2004, informing it that "we have decided not to draw the tenth and final tranche under the PRGF' so that these resources would become available for other countries in need of concessional support from the Fund."
Greater love hath no man than that he should forgo his IMF tranche in favour of a needier debtor, even though he might have to use that very bowl to beg again one day, as we are doing.
To be fair to ourselves, we are not chronic beggars, habitually parked outside IMF's doorstep. Over the period 1958-2000, we drew down less than half the $6.2 billion we had been originally sanctioned. In 2000-1, following the post-Chagai nuclear sanctions, we drew down the full SBA of $465 million requested by us. Between 2001-4, we availed all but the last tranche of the PRGF facility, of which $787 million is still outstanding. The last instalment is due in 2014.
Today, we have begun discussions with the IMF for financing under a concessional Stand-By Arrangement. This, in IMF’s parlance, "stipulates the specific policies and measures a country has agreed to implement to resolve its balance of payments problem.
The economic program underlying an arrangement is formulated by the country in consultation with IMF, and is presented to the Fund's Executive Board in a 'Letter of Intent.' Once an arrangement Is approved by the Board, the loan is released in phased instalments as the program is imple-
mented."
The IMF announced that while discussions were ongoing, as of October 22, the amount of financing under SBA had not been determined. Meanwhile, the IMF has said that we can avail of the more expensive Emergency Fund Mechanism, because it is quick-disbursing and does not involve adherence to performance criteria. We will be in the company of such other emergency-afflicted countries as Bangladesh (floods), Haiti (hurricane) Turkey (earthquake), and the Maldives (tsunami).
Reading the previous Letters of Intent signed by our finance minister/advisor on finance, jointly with the Governor State Bank, makes one realise how much we have changed, and yet how little. Ten years ago, we were promising action on Wapda and KESC. We undertook to introduce agricultural tax, to broaden our registered tax-payers base to 1.8 million, and to introduce a host of fiscal measures. We are again parroting those undertakings.
When, in a flush of new-found economic maturity four years ago, we told the IMF that our future financial needs would be met primarily from domestic and international markets, we ticked the number of IMF-specific benchmarks we had been able to attain between 1998 and 2004. Then why should we have gone so horribly wrong yet again?
We should not waste our time finding out. It is too late now to lament over our mistakes. It is time to do something about a future that we have forfeited but have no right to renounce on behalf of future generations of Pakistanis, almost 80 million of whom are still under the age of twenty. They deserve to live their dreams, not have to re-live our nightmares.
FS Aijazuddm Is an eminent Pakistani journalist and author