Pakistan has always been a recipient of the IMF lended money as a part of their foreign aid program. The country has always faced an issue to maintain an equilibrium of its balance of payment supports. Moreover, Pakistan is an economy which is mostly supported by the imported goods, so the country has been consistently knocking the doors of IMF to help reduce its fiscal deficits as imports exceed its exports. Pakistan was once again slashed by the falling balance of payments in 2017-18 which led to its devaluation of its currency by an all-time low of fifteen percent against dollar which led the exchange rate to be set around $1=176Rs (Mian, 2018).
To counter this alarming Pakistan looked towards the fellow Muslim state Saudi Arabia to help the crumbling economy financially. The former prime minister Imran Khan paid a visit to Riyadh for negotiations which ultimately convinced the Saudi government to deposit Pakistan with $3 billion and an addition loan of $1.2Billion to help attain oil and petroleum reserves (Khan, 2018). However, Pakistan had to return $2 billion out of that loan and had to cancel that $1.2Billion petroleum because the relations between the two states decayed (The Economic Times, 2022). After being rejected by its friendly states the was once again forced to knock the doors of the lender of the last resort called the “IMF” which fostered the position of Pakistan as a fragile state and maintained its hegemony over Pakistan.
IMF approved Pakistan’s bailout of $6Billion in 2019 as an attempt to save the sinking economy of a Pakistan. This bail-out was considered to be the biggest aid to Pakistan in its tenure of seeking assistance to Pakistan (TRT World, 2018). This aid, however in reality paved the way for IMF to meddle into Pakistan’s economy by imposing fundamental economic conditions upon the country to secure a loan from this International Financial Institution. Pakistan being a country which is in a fragile position was forced to impose such conditions on its country. As quoted in the third world quarterly journal, the author Olivier Nay claims that these International Financial consider it a responsibility to meddle into the fragile states as labelled by them (Nay, 2014). The donor organizations create interventions that justify their interference into the fragile states’ economies. Moreover, these loans given are only conditional on the offer that the lender country has to fulfill all the demands laid out by such donor organizations. This was proved to be true a IMF slashed Pakistan with six new conditions to fulfill before it can release the bail-out allocated (Rana, 2022).
The conditions which were solely gravitated towards increasing the tax rate, power tariffs which ultimately led to the massive surge in the inflation of the country. As, the petroleum products raised its price, the price of other utilities gained momentum of the skyrocketing prices which left the larger public at unrest. The IMF continued to impose its harsh conditions upon Pakistan according to its formulated policies because it was lending money to Pakistan.
Secondly, Pakistan was further subjected to the ideology of the IMF for the prosperity for the country’s institutions. IMF operates on a set of policies called the Washington consensus which was a term coined by John Williamson in 1989 (Irwin, 2021). The set of policies incorporated within the Washington consensus stringently align with the Neoliberal economic order and the country seeking financial aid from the IMF has to comply with these policies laid out by the IMF’s mandate. These International financial institutions are called the enforcers of ideas as a part of their surveillance strategy as they monitor the implementation of their ideas in the developing countries seeking aid (Nay, 2014). This helps foster their legitimacy and domination which ultimately results in the country losing its autonomy. Pakistan was also forced to implement the Neoliberal economic order within its country when it had to increase the tariffs on the energy sector and has to raise the amount of income tax levied on the public (Rana, 2022). Moreover, the government of Pakistan had to cease the provision of its subsidies from the power sector and was compelled to capitalize to privatize its private sector banks regardless of the economical context of the country (Rana, 2022).
The most pertinent set back which fostered the deterioration of Pakistan’s economy was that the Neoliberal economic policies didn’t prove to be a fruitful intervention within the country’s fragile economy. The inflation doubled and the utility prices surged which affected the salaried class in enormous ways (The world Bank, 2022). The situation was further aggravated by the closure of the foreign investments in the country which slammed the doors of the employment generation within the country. These conditions proved the theory of the John Brohman who states that the Neoliberal ideology was ideally crafted to align with the European context but was implemented in the entire world either directly or through the international financial institutions in the name of development (Brohman, 1995). The essence of development got disoriented when the Neoliberal policies did not favour the third world countries such as Pakistan, because the policies were not crafted from the lens of the third world countries. Brohman tries to convince the audience that the Neoliberal economic order was only crafted to create a western hegemony through its financial institutions in the entire third world (Brohman, 1995). The history and culture of the third world is not congruent with the Neoliberal ideology which results in a great disarray of chaos and puts the economy of the fragile states in such a position that the economy is merely reduced to nothing less than a sinking ship (Haider, 2022).
References:
Brohman, J. (1995, March). Universalism, Eurocentrism, and Ideological Bias in Development Studies: From Modernisation to Neoliberalism. Retrieved from https://www.jstor.org: https://www.jstor.org/stable/pdf/3992977.pdf?refreqid=excelsior%3Abd4c00e7a7a63a6975dcccceb7d5af0d&ab_segments=&origin=&acceptTC=1
Haider, S. (2022, March 26). Neoliberalism, Globalisation and Englishism: Exploring Ideological Assumptions Attached with the English Language in Pakistan. Retrieved from https://link.springer.com: https://link.springer.com/chapter/10.1007/978-3-030-92353-2_12
Irwin, D. A. (2021, September 8). What is the “Washington Consensus?”. Retrieved from https://www.piie.com: https://www.piie.com/blogs/realtime-economic-issues-watch/what-washington-consensus
Khan, S. (2018, October 23). Saudi Arabia agrees to provide Pakistan $3 billion to address balance-of-payments crisis. Retrieved from https://www.dawn.com: https://www.dawn.com/news/1440860
Mian, A. (2018, August 9). Why Pakistan is back in trouble with balance of payment. Retrieved from https://herald.dawn.com: https://herald.dawn.com/news/1398616
Nay, O. (2014, March 20). International Organisations and the Production of Hegemonic Knowledge: how the World Bank and the oecd helped invent the Fragile State Concept. Retrieved from https://www.tandfonline.com: https://www.tandfonline.com/doi/pdf/10.1080/01436597.2014.878128?needAccess=true
Rana, S. (2022, February 5). IMF slaps six new conditions on Pakistan. Retrieved from https://tribune.com.pk: https://tribune.com.pk/story/2342087/imf-slaps-six-new-conditions-on-pakistan
The Economic Times. (2022, February 11). Pakistan has to return $3 billion to Saudi Arabia within one year: Finance Minister. Retrieved from https://economictimes.indiatimes.com: https://economictimes.indiatimes.com/news/international/world-news/pakistan-has-to-return-3-billion-to-saudi-arabia-within-one-year-finance-minister/articleshow/89506269.cms?from=mdr
The world Bank. (2022). The World Bank in Pakistan. Retrieved from https://www.worldbank.org: https://www.worldbank.org/en/country/pakistan/overview
TRT World. (2018, October 8). Pakistan to begin bailout talks with IMF – finance minister. Retrieved from https://www.trtworld.com: https://www.trtworld.com/asia/pakistan-to-begin-bailout-talks-with-imf-finance-minister-20742
