A low growth rate, a low savings and investment rate, a high inflation rate and high external debt ratios are only some of the obvious indicators of a failing system in Pakistan. Yet, the International Monetary Fund (IMF) has poured another $1.13 billion into a black hole called Pakistan, hoping against hope that the money will be put to good use and repaid with interest! It is not as if the IMF does not know how bad the situation is in Pakistan given that the Fund team was not willing to go to Islamabad for the negotiations and insisted on meeting Pakistan finance ministry officials in Dubai! What is ironic, however, is that on the one hand the US government approves a bailout package to a government that is hardly delivering on its promises on fighting terrorism, and on the other, the US Senate adopts unanimously a resolution that says America will not underwrite Europe’s profligacy. In a 94-0 vote, the Senate has demanded that the US administration certify any future loans made by the IMF would be fully repaid. The vote mandates that no US government can support an IMF loan unless there is assurance that it will be repaid in full. Without a firm commitment to repay, no borrowing government will be entitled to help. As one US Senator put it, “This amendment will help prevent American taxpayer dollars from underwriting dysfunctional governments abroad. American taxpayers have seen more bailouts than they can stomach, and the last thing they should have to worry about are their hard-earned tax dollars being used to rescue a foreign government.”
Needless to add the US does not help foreign governments as an act of philanthropy. Governments in need sign up to help the US attain its many needs — some economic, some political, some geo-political and geo-economic. While Americans may be loathe to pitching in for Europe, they have few options but to backstop an ally, even if a failing one. Pakistan’s current economic woes are relatively recent. During the Musharraf era, Pakistan stepped up its growth rate, to close to 6 per cent per annum, though even in the best of years India continued to outstrip Pakistan. With the exit of the General, Pakistan’s economy has slipped. Some may draw the tempting conclusion that military rule is better for Pakistan’s economy than civilian rule. The more disturbing conclusion some may draw is that Pakistan needs to keep the US on the edge while playing the role of an ally to keep the dollars coming. Hopefully, the US national security advisor will disabuse Pakistan of such thoughts and get it to deliver better in the fight against terrorism. Getting the IMF to be a tougher lender may be one good way of ensuring that. This is one dysfunctional government that US taxpayers shouldn’t be bankrolling the way they are. The Fund has been scared to act tough after its ignominious exit from Southeast and East Asia. But the Pakistan economy would benefit from some tough Fund conditionality.