Back to the IMF

Except for a miracle happening, one does not see Pakistan avoiding an IMF programme much longer. Of course, if we could get swap arrangement of say $3-5 billion from China and/or from Saudi Arabia (deposit in State Bank of Pakistan) we could delay going to the Fund but only for a couple of months.
The fiction that once the PTI was in the saddle in Islamabad the "$200 billion or so" stashed in tax havens as well as in the UK, the US and the UAE would automatically start returning home had turned out to be, within a week of the government formation, for what it was.
And the myth that overseas Pakistanis would start donating their hard earned savings to Pakistan's treasury once the world's champion fundraiser, Imran Khan would take over the reins of the government, took no more than three weeks or so to get demolished.
With these two fairytale options out of the reckoning we were soon forced to look at Saudi Arabia. But to no avail. No make-believe $10 billion handout was promised because the Saudi economy itself is in a shambles. Saudi oil facility on deferred payment was also out because we needed to keep the IMF window open. The Fund does not entertain bailout application from countries that enjoyed such a facility.
We even voted along with seven others at the UN against extending an international probe of alleged war crimes committed in Yemen. The United Nations Human Rights Council got the resolution passed with 21 votes in favour. But all that we could get out of this bargain are a few Memoranda of Understanding (MoUs) which are no more than promises that the Saudis would set up an oil refinery in Gwadar and enhance the two-way trade volume. A swap arrangement is also on the wish list.
Also, attempts to reset our relations with the US seem to have failed to yield any positive result. Even after a ten-day tour of the US by Foreign Minister Shah Mehmood Qureishi where he met both the Secretary of State Mike Pompeo and US National Security Advisor John Bolton Washington has not even agreed to restore the age-old military training programme or sell us the badly needed night vision equipment.
So, now we are all set to apply for an IMF bailout which if approved, it is feared, would carry extremely tough conditionalities that would include not only economic ones but political provisions as well.
One recalls that when we were similarly down and out with a military dictator at the helm our application for a paltry Standby Arrangement in June 2000 was approved not only with front loaded economic and political conditionalities but the country also had to give an unwritten undertaking to agree to restart peace talks with India which led to the Agra summit which failed because of the obduracy of the negotiators, both the Indians and Pakistanis.
But those were the days when we were still enjoying fairly good relations with the US. Now the situation has undergone a drastic change for the worse. Therefore, one cannot rule out the possibility that the US would not influence the Fund to impose harsher economic and political conditionalities.
Therefore, we need to be extremely careful while signing the bailout agreement, especially keeping a close watch on what is being inserted in the fine print.
In order for a realistic approach to the Fund proposed bailout it would not be a waste of time to conduct an in-depth study of the Fund bailouts Greece received in recent years and whether they had secured Greece's economic survival or just created unsustainable debt.
In 2010, when the Greek debt crisis started, Greece received €110bn in bailout money. And in 2012, the country received a second bailout of €130bn. These loans were deemed necessary to stop Greece going bankrupt.
In exchange, Greece was required to make deep public spending cuts, raise taxes and introduce fundamental changes to the public sector and labour legislation.
But seven years on, and many more billions of euros later, was this price worth paying, both from the point of view of Greece's creditors and of the Greek people?
It is impossible to know what the situation would be like now had Greece not received the bailouts, but the consequences of receiving them have been painful.
For the Greek people, the bailouts and the austerity measures implemented with them have come at a huge cost.
Unemployment remained staggeringly high: 22.5% of Greeks were unemployed in March 2017. And almost half of people under the age of 25 were out of work.
Those who did work earned less. The minimum monthly wage at the beginning of the crisis was €863. It soon fell to €684.
Pensioners have been hit particularly hard. Pension changes since 2010 meant 43% of pensioners lived on less than €660 a month, according to the Greek government.
Government spending on health was almost halved between 2010 and 2015, while the education budget was cut by 20%.
Ten years and more than $300 billion in rescue loans later, Greece is said to have begun its recovery, but Greeks still have an economy that's 25 percent smaller than it was before the crisis began. Its unemployment rate is the highest in the Eurozone. One-third of Greeks now live in poverty or close to it. In terms of length and severity, Greece's economic slide is said to be comparable to the US Great Depression.
Austerity politics are said to be dangerous. They are said to widen the divide between haves and the have-nots within individual societies, helping to make resentment and fear the driving forces in domestic politics. They also are said to exacerbate inequality. Austerity may be good at balancing bank accounts, but it's said to be disastrous at shrinking widening inequality of both the economic and political varieties.
Another critical lesson the Greek ordeal has taught the world: In the 21st century, the economic troubles of the present can extend far into the future. While most reports on Greece have understandably focused on the economic misery of the moment, the real tragedy of Greece's lost decade of economic growth is that it will shortly become a lost generation of economic growth, even if the economy could manage to magically snap back to its pre-crisis levels tomorrow.
Nearly 500,000 Greeks are already said to have fled the country in search of better opportunities abroad, and there is little hope of these people returning as they start their careers and families elsewhere.
This is not the first time there's been a mass migration of Greek workers, but the ones leaving this time around are said to be the most educated and capable individuals that the Greek educational system has produced. Their flight means that Greece's already-broken pension system will be starved of the country's most economically productive members, and will exacerbate a looming demographic crunch already in the making as the elderly and the young get left behind. In a globalized world where the movement of people is now easier than ever, a country's current economic missteps have the potential to reverberate for years to come.
Also, let us also not forget that in December 2000 Pakistan received one of the most generous bailouts in the shape of a three-year Poverty Reduction and Growth Facility (PRGF) amounting to $1.322 billion.
At the same time, the international community offered exceptional financial assistance of about US$9.5 billion in the form of bilateral support, including debt relief, and assistance from international financial institutions.
Under the PRGF-supported programme, the government was to implement an ambitious reform agenda aimed at raising growth and reducing poverty, while consolidating macroeconomic stability and external viability. The strategy centered on sustained fiscal adjustment supported by a major reform of tax administration and a widening of the tax net, while increasing public spending for poverty alleviation.
A cautious monetary policy, under the floating exchange regime, was to aim at keeping inflation below 5 percent and raising official reserves to three months of imports by the end of the three-year program.
Medium-term fiscal consolidation, combined with significant external assistance, was to allow a substantial reduction in the public debt as a share of GDP and free up resources for growth-enhancing and poverty-reducing expenditure. However, in order to achieve the targeted social outcomes, the government had needed to complement higher resource mobilization with better prioritization of public expenditure allocation, so as to allow higher outlays on social sectors, especially health and education.
Enhanced governance and transparency in public finances, particularly in the context of the devolution of responsibility for most social service delivery to local governments, was also to be important. Multilateral loans were to become repayable after ten years with five years of grace period which meant around 2015.
Over the program period, the government was to pursue a broad agenda of restructuring and privatization of public enterprises, reducing the government's role in agricultural marketing, ensuring that administered gas and electricity prices broadly reflect market conditions, deepening the liberalization of the financial sector, and integrating the kerb and interbank foreign exchange markets.
All this was done only half-heartedly. And while the growth rate reached 6-7 percent with energy consumption skyrocketing we kept increasing fossil fuel--mostly domestic gas and imported crude and petroleum products. And once the global oil prices went through the roof from $60 a barrel to $150 a barrel our economy went into a tailspin because we did not use the financial respite provided by the PRGF related fiscal room of nearly $10 billion to introduce the second generation structural reforms.
And that is the reason we are suffering today. What happened in the interim 10 years is also because of using the 9/11-related windfall to increase consumption without bothering about the unsecured tomorrows.