Someone in the IMF is not familiar with Dr Samuel Johnson’s witty definition of a second marriage – ‘a triumph of hope over experience.’ The IMF and Pakistan have been in and out of wedlock not twice but multiple times.

One would have imagined that an institution as experienced as the IMF would spot a habitual offender amongst a pack of its financial delinquents. Apparently not. No sooner had Pakistan digested the Stand-By Arrangement (SBA) of $3 bn. extended by the IMF in 2023-4 than it applied for a loan of $7 bn. Even addicts draw a breath before the next snort.

Recall our predicament in June last year. We were desperate for the release of the last $1.1 bn. tranche of the SBA. PM Shehbaz Sharif assured the IMF MD Mme. Georgieva that if reelected, he stood ‘committed to turning over the economy with the help of IMF and development partners’. On her part, Mme. Georgieva reminded him that, although he had built ‘a very convincing case’, the IMF Board recalled ‘the past trust deficit’ and reiterated its skepticism about Pakistan’s freshest undertakings. She then mollified her Board with the assurance that Pakistan would ‘deliver on its commitments…as she had personally met the prime minister and seen his seriousness to deliver.’

In reciprocation, our PM expressed his ‘profound gratitude’ for her ‘support and assistance’ and sent her some mangoes in appreciation of ‘her leadership and professionalism.’

Apparently, mangoes did the trick. A year later, on 25 September 2024, the IMF approved a 37-month Extended Arrangement for SDR 5,320 m. (around US$7 billion). It was an anniversary of sorts. This is the 25th time Pakistan has approached the IMF for a bailout.

To obtain this $7 bn. loan and its first tranche of about $1 bn., Pakistan has assured the IMF that it promises to implement radical changes which will test the public’s patriotism and the sinews of our Federation. The new programme comes with about 40 conditions or ’bitter pills’. These include bringing undertaxed sectors including retail, export, industrialists, developers, and large-scale agriculture a provincial prerogative) into the income tax regime. Provinces have until 1st July 2025 to amend their Agriculture Income Tax laws.

The Government has agreed to reduce ‘non-transparent support through exemptions for privileged sectors like real estate, agriculture, manufacturing, and energy, as well as, through the proliferation of Special Economic Zones (SEZs).’ The IMF demands the abolition of Special Economic Zones by 2035. CPEC however plans into 2030 the expansion of Special Economic Zones (SEZs) and Free Trade Zones (FTZs), especially Gwadar Port. The IMF programme repeats a familiar mantra – earn more, spend less, and minimise borrowing.

The IMF recognises the inherent schisms in Pakistan’s political structure: ‘Political economy considerations and pressures from vested interests could delay or weaken the reform momentum and put at risk still-brittle stability.’

The IMF also expects Pakistan to be supported by ‘development and bilateral partners’, i.e. the World Bank, ADB, Saudi Arabia, the U.A.E., and China. The CPEC is the IMF’s bug bear. The IMF sought transparent disclosure; Pakistan hid behind legal obfuscation. In 2022, the IMF carped that Pakistan owed more to China than the IMF and DFIs combined. In 2022, Pakistan owed China $26.6 bn., and to the IMF about US$7 bn.

The IMF’s Staff report supporting the $7 bn. loan approval contains an odd justification. Para 47 reads: ‘Reputational risks would arise if the Fund were perceived as treating Pakistan differently from other members that ostensibly enjoy less support. Alternatively, not proceeding with a new program also raises reputational risks as the new authorities, or other members, may accuse the Fund of not being evenhanded’.

The IMF recognises that some debtors have no prospect of being repaid on time, unless a major creditor (China) either reschedules or rolls over or writes off its loans. The Chinese may do the first, possibly also the second. China is not in the business of giving charity without cause. When will China tire of being Pakistan’s banker of the first and the last resort? One suspects it will reconsider its largesse after the next U.S. administration is in place.

For the time being, Pakistan is enjoying the advantage of a pre-U.S. election windfall. The latest IMF loan is spread over the next three years, with periodic reviews. Whichever candidate – Donald Trump or Kamala Harris - wins the White House in November, our $7 bn. IMF life-line will definitely come under scrutiny. President Trump gave a previous PM a personal tour of the White House. Will he be inclined to extend a similar courtesy to his successor? Kamala Harris knows Pakistan as India’s irascible neighbour. Her DNA could colour her judgement. Meanwhile, to paraphrase Herbert Hoover: ‘Accursed are the young, for they shall inherit our national debt’.

F. S. AIJAZUDDIN

[DAWN, 17 October 2024]