According to the IMF, Pakistan must radically change its economic strategy, and raise 360 billion rupees ($3.67 billion) or 1.5 per cent of its GDP, before the Fund will agree to a new programme. Pakistan has not formally applied for IMF support, but after January technical talks the Fund has recommended a programme of taxes and spending cuts to address the country’s 16.24 trillion rupee deficit.
In oral evidence to the UK parliament’s international development committee in January, former IMF executive director from Pakistan, Anwar Akhtar, recalled that the conditionality attached to the IMF lending programmes in the 1990s had a poor record of implementation and that past IMF-required reforms were sweetened by exemptions that were “key in keeping the vested interests in industry going.” Akhtar added that “we are now in 2013, and these exemptions still remain.”
He partly placed the blame on the US ‘war on terror’ after the terrorist attacks in 2001, which prompted the US and other rich countries to “fall in behind protecting a government that is on their side”. In an example of a failed 2002 tax administration project which again left in place implicit subsidies for domestic industries favoured by the government, Akhtar implicated the World Bank and the IMF: “There was the World Bank sitting there; there was [the UK Department for International Development]; there was the IMF. Did anyone say, ‘Why are you taking these industries out of the [general sales tax]?’ Nobody said a word. They stopped audit in 2004. How can you run a tax administration without audit? Nobody said a word. The World Bank said nothing. … This programme had not even started the functional integration of the tax administration. You were then eight years into the programme, which had failed, and they had not even started. … There was no willingness on the part of the administration to hand over what are essentially rent-seeking opportunities. It is not just the politicians who are corrupt, but also the tax administrators.”
Khadim Hussain, from Pakistani NGO ResistIFIs, described the current negotiations as an “onslaught” on Pakistan’s economy and concurred with the assessment of Akhtar, saying “the nexus between the economic-sector bureaucracy of Pakistan and IMF has grown ever stronger.” He went on to say “the IMF’s prescription to stabilise the economy can’t be implemented and both the bureaucracies of Pakistan and the IMF know it. This is nothing but an excuse for the lending which will befool the world and increase poverty”.