Leadership not IMF is the issue...

... a few excerpts from Yousaf Nazar's opinion published in DAWN, October 29, 2008

PAKISTAN’S current economic meltdown is a crisis of competence if judged in light of the recent past. In the context of history, it represents a colossal failure of the establishment’s long-term foreign and economic policies.

The government continued Musharraf’s Washington-centric foreign policy. Yet, in the hour of its greatest need, the US not only ditched Pakistan but a third-ranking state department official publicly humiliated its ‘friend’ by saying that the Friends of Pakistan “wouldn’t throw money on the table”. This wasn’t surprising given Condoleezza Rice’s more subtle remarks earlier on Sept 26: “We are very engaged with Pakistan, through the international financial institutions, to help Pakistan as it takes the difficult decisions that it is and must take on economic reform.” Translated: Pakistan should go to the IMF and reform its economy.While the US pressure on Pakistan to go the IMF has political undertones, it is also true that Pakistani rulers’ historic tendency to indulge in profligate spending and corruption has left them with few sympathisers despite the much trumpeted ‘geostrategic’ importance of Pakistan.

The US has historically directed most of its ‘aid’ to make Pakistan fight its wars. The aid has been primarily used for military purposes (e.g. Pakistan’s arms purchase orders in 2006 alone totalled $5.1bn) but the indirect cost of the conflicts since 1980 has been catastrophic, although some people continue to believe in the ‘benefits’ of such ‘aid’.

The ‘aid syndrome’ stymied any serious effort to reform the economy. Infrastructure investments and tax reforms were neglected because the so-called austerity programmes advocated by the multilaterals hit subsidies but not the pockets of vested interests. Oil and food subsidies played a major role in Asia and the European Union respectively in keeping the prices low because the governments had fiscal space, of which Pakistan never had much. Cutting fat in defence and establishment expenditures and taxing the rich were not high on the multilaterals’ reform agenda as the focus was usually on indirect taxes (e.g. sales tax) that inevitably hit the lower-income groups.

But what is the point in complaining about the US’s ‘real agenda’ or the IMF’s ‘conditionalities’ when the country’s leaders are unwilling to tighten their belts and undertake necessary reforms and are known to own assets worth hundreds of millions of dollars abroad? Confidence and credibility are important issues and cannot be wished away.

Full article at Random Thoughts

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