Pakistan is not the only country that has faced financial crises, but we appear to be one of the few – like Argentina – that prefers to live in cloud cuckoo land and believe that someone will bail us out. Pakistan is currently in its 23rd bailout program from the IMF — the IMF is like the ICU – if a country has gone 23 times to the ICU and will need to go back for a 24th time then something is seriously wrong with the economic fundamentals of the country not with the IMF as Pakistan’s leaders allege.
Our next door neighbor, India dealt with a dire situation in 1991 when the country was weeks away from defaulting on its external balance-of-payments commitments, with its foreign exchange reserves falling to less than $1.2 billion. The IMF suspended its loan program and the World Bank discontinued assistance. To avoid defaulting, the government took various steps, including pledging a substantial portion of its gold reserves to the Bank of England and the Union Bank of Switzerland as collateral so that it could secure foreign exchange to meet its debt obligations.
At that time, instead of blaming the collapse of the Soviet Union or American perfidy, finance minister Manmohan Singh stated: “I do not minimise the difficulties that lie ahead in the long and arduous journey on which we have embarked. But as Victor Hugo once said, ‘no power on earth can stop an idea whose time has come’.” India never looked back from there and the reforms undertaken by the then Indian government ultimately led to its emergence as the world’s third largest economy. The continuity of policy, despite a change of government, has also been critical to India’s march forward.
Pakistan can also turn the present crisis into an opportunity. But is that going to happen.
In a recent column, author and columnist Zahid Hussain answers it in the negative: “Unfortunately, the government neither has the will nor the capacity to undertake the tough reform measures required to stabilise the economy and prevent the country from defaulting. While India brought in a renowned economist to steer the country out of crisis, we have an accountant at the helm whose only credentials for the job is his being related to the powerful ruling family.”
Hussain concludes by warning, “Dar says there is a Plan B ready to prevent default if the agreement with the IMF doesn’t come through. Interestingly, no one even in government seems to know about this secret plan. The finance minister is mistaken if he thinks that he can get money from friendly countries. No country is willing to dole out free money. Even if it happens, it will give the country only brief respite and would not resolve the basic structural problem needed to take the economy forward.”
