IMF criticised for failing to recognise climate change-induced impact of floods

KARACHI: “The International Monetary Fund’s prior actions for the approval of a long-delayed loan are not just crippling Pakistani economy but also jeopardizing its post-flood mitigation, adaptation and compensation measures necessitated by the ever-worsening consequences of climate change.”

These views were expressed by the speakers at a webinar organised on Friday by the Alliance for Climate Justice and Clean Energy (ACJCE).

The speakers at the webinar said that similar prior actions have strangulated economic growth potential in several other economies and discouraged them from developing and deploying homegrown solutions to climatic problems.

Lamenting that the IMF’s prior actions do not included any measures that support rehabilitation and reconstruction efforts needed for socio-economic revival of the flood-hit areas in southern parts of Pakistan, they said that the loan’s approval has been delayed for many months even though its conditionalities are already making life difficult for the economically most marginalised sections of the society.

“The IMF review of Pakistan’s compliance with the loan’s prior action has not recognised the climate change induced impact of the 2022 floods,” said Hashim Rashid, a researcher working at a Lahore-based legal research institution, Alternative Collective Law, which is also a member of ACJCE.

“The flat refusal to allow fuel subsidies for lower-middle class and poor population shows that the IMF is not interested in mitigating the impact of economic and environmental disasters that Pakistanis have faced in the last year or so,” he said and added that the IMF, instead, should have linked the phasing out of subsidies on fossil fuels with the promotion and incentivising of renewable energy.

Rashid, who has also sent a letter to the IMF on behalf of ACJCE, said that while uncertainty still prevails on whether the loan will be approved after all, its associated “prior actions have already caused many negative outcomes for Pakistan’s struggling and stagnant economy such as falling currency, hyperinflation, rising taxes, spiraling energy prices and production costs across all sectors of economy.”

The IMF’s failure to approve the loan while insisting that its prior actions must be met at any cost has stymied many nascent industries that could increase the use of renewable sources of energy, he added.

“The IMF-imposed fiscal restrictions have jeopardized the import and local manufacture of electric and hybrid vehicles.”

Federico Sibaja, Argentinean social campaigner working with Recourse, an international civil society group said on the occasion that his country has defaulted on its loan payments nine times since early 1990s despite having followed IMF’s solutions for its persistence economic crisis for the last 30 years.

“The hyperinflation and IMF dependency prevailing in Argentina remind its people of the hardships caused by the debt repayment crisis of the 1980s,” Sibaja said and added that “we have learnt no lessons from the past” and have once again accepted the largest ever loan package from IMF with all its attendant prior actions.

Under this loan package, according to him, the IMF continues to push for accelerating the growth of exports in such sectors as fossil fuel extraction, agricultural industry and mining but is giving no consideration to the “negative social and ecological consequences of this growth,” he added.

Fiza Qureshi, a senior representative of Indus Consortium, Islamabad-based member organisation of ACJCE, also criticised IMF’s prior actions for thwarting Pakistan’s much-needed transition to renewable energy sources.

“As a follow-up on its negotiation with the IMF, the Pakistan government has removed subsidies on solar panels and their associated materials. This has adversely impacted our national goals related to energy transition and renewable energy promotion,” she said.

Copyright Business Recorder, 2023