International Scene

A chronology of IMF -Pakistan relationship

(As pakistan is presently having an IMF man as its prime minister similar to India, an overview is presented how IMF came to dominance in that country by dancing with the dictators and serving the US imperialists-RS)
As in most of the developing countries, IMF funding patterns to Pakistan has been subject of intense debate, over the last three decades. Proponents and opponents of IMF have produced evidence to support their respective point of views, particularly in broader perspective of international relations. However, little effort is made to explore the genesis of funding patterns linkage with political objectives of the IMF. In order to understand this crucial aspect of IMF packages we have to go beyond the typical debate of purely economic effects of IMF policies on Pakistan.
A careful overview of particular history of IMF packages for Pakistan in terms of their volume, timing, terms and conditions and rationale provides us an interesting picture of politically motivated patterns of funding.
Pakistan joined IMF in 1950.The first time government of Pakistan went for a loan from IMF was in 1958. It was a Stand By Agreement worth US $ 25 million. However, the loan was cancelled soon after. It was a period of political upheavals in Pakistan and Pakistan’s first military dictator Field Marshal Ayub Khan was about to take over. However, during 1960s under Ayub-dictatorship, IMF happily granted two Standby Agreements (SBAs). One in 1965, other in 1968 to help solve Ayub regime’s financial difficulties. When Pakistan’s second military dictator General Yahya Khan replaced Ayub Khan, IMF continued showering its financial blessing over him. Four more SBAs were made, handing Yahya regime down a loan worth US $ 330 million.
However, with the first popularly elected government of ZA Bhutto coming to power, IMF behavior towards democratic government became cooler and it almost deleted Pakistan from the favorite list on account of Bhutto’s ‘socialist agenda’. That was why Bhutto had to tell the Fund to “go to hell, we do not want your money”.
However, in 1979, when General. Zia-ul-Haq was at the helm, the nature and extent of IMF involvement drastically changed. The IMF extended lavish package for the dear dictator. Statistics show that in 20 years (1958-1979) Pakistan had collective IMF packages of worth US $ 460 million. However, in November 1980, it extended a huge amount of US $ 1.27 billion to Zia regime through long-term Extended Fund Facility (EFF). The amount was three times the entire amount lent through 7 SBA packages in preceding 20 years.
This rapid increase in IFM loans, from 1977-8 to 1980-81, signifies the importance of Pakistan to IMF and its master the USA. The IMF was so keen in financial pampering of Zia regime that besides such huge direct funding, it influenced the aid-giving policies of a large number of Western countries, convincing them for funding Zia’s Pakistan.Also, the IMF packages throughout the 1970s, being Stand By Agreements, had the essential characteristics of high interest rates when Z A Bhutto was in power. However, contrary to the stringent measures during 1970s, IMF extended mild and favorable conditions to Zia regime November 1980 onwards.
The amount of package was biggest ever for any developing country until then. Also, rescheduling of repayment of debts was arranged through “Aid to Pakistan” Consortium rather than by Paris Club. This was a deviation from standard lending practices and out of the way arrangement.
There is a subtle difference between the approaches of Paris Club and Consortium. The Paris Club is primarily made of professional bankers while Consortium reflects long-term global political interests.IMFs invariable magnanimity towards Zia regime can easily be attributed to two major geo-political factors at the time; the Iranian revolution and Soviet intervention in Afghanistan. Thus there were no economic factors, as usually claimed by Fund, for their large scale fund allocations.