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Between the devil and the deep sea

Pakistan has so far only made a formal move to seek the IMF bailout package. Tough negotiations, which form the most painful part of the deal, have not yet started. Early reports say Islamabad would be seeking up to $12 billion, although its requirements are estimated to be not less than $20 billion.

Money lenders by nature are ruthless. And IMF is no exception. So, when Pakistan’s new Prime Minister Imran Khan is seeking a hefty bail-out package from the world’s biggest money lender, he should be ready to meet nerve-racking conditionalities imposed by the fund managers, which his country with a battered economy will find extremely tough to stomach. IMF loans come with strings attached and the fund officials breathing down the neck of the recipient government. That Imran has already made a false start is indicated by his latest announcement of the plan to build five million homes for the needy using government money.

Pakistan has so far only made a formal move to seek the IMF bailout package. Tough negotiations, which form the most painful part of the deal, have not yet started. Early reports say Islamabad would be seeking up to $12 billion, although its requirements are estimated to be not less than $20 billion. Fund managing director Christine Lagarde is holding talks with Pakistani officials in Indonesia’s Bali, where the IMF-World Bank annual meeting is currently underway. Christine has already indicated that the Fund would seek “absolute transparency” about the Islamic country’s debt situation, obviously a reference to China’s massive investment programme in Pakistan under Beijing’s Belt and Road project. Of the estimated $62 billion of Chinese investments, the major component is believed in be in the form of costly loans taken from Chinese banks. That would give an idea about the kind of indebtedness Pakistan has run up over the years.

As they say, there are no more free lunches and Pakistan is learning it the hard way. The Chinese have perfected a new kind of investment imperialism into an art form and has used it with telling effect in both Pakistan and Sri Lanka, the latter having already realised the trap it has walked into and is desperately trying to extricate. During the election campaign Imran had criticised Nawaz Sharif for keeping the country in the dark about the size of the debt and had promised to curtail some of the projects. Now he has the opportunity and the compulsion to throw the books open, which will be a pre-requisite for the IMF bail-out.

IMF loans come at a cost and a lot of pain for the people and the government accepting them. These are also accompanied by a strict austerity plan to ensure that the governments are able to repay the debt as per agreed terms. Unlike China, which uses the investments as a tool for its hegemonic ambitions without calling them as such, the IMF is driven by the cardinal objective of safeguarding and reclaiming its money and, therefore, makes all the conditionalities be known upfront. That is the big difference between the two.

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