On the IMF Loan to Pakistan

According to a press release from the International Monetary Fund, a loan to repair the economic situation in Pakistan has been approved. The $6.64 billion loan, "is expected to help the economy rebound, forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit, and undertake comprehensive structural reforms to boost investment and growth." The government of Pakistan will receive $544.5 million immediately and the rest will be dispersed over the course of three years. The conditions of the loan require the government to collect more taxes from the people, reduce energy subsidies, and reform government practices. The success of these efforts will be reviewed quarterly and determine future payments. The press release fails to mention the failed loan it made to Pakistan in 2008 in the amount of $11 billion.

A September 4th article from Al Jazeera describes the 2008 loan as suspended 2 years ago when the government failed to meet reform requirements. This new loan will cover the payments, in the amount of $5 billion, that is still owed to the IMF; in addition to covering a hefty trade deficit.

It was only this year that transparency.org reported on the views Pakistani citizens have about corruption. It was not good, 54% of respondents answered that corruption has “increased a lot.” One of the requirements of the loan is for tax loopholes and deductions to be closed; 55% of respondents have reported paying a bribe to tax revenue collectors in the last 12 months. The very civil servants and public officials one would expect to distribute the loan funds are thought to be corrupt or extremely corrupt by 81% of those polled.

 Many of us still have unanswered questions about the relationships Osama bin Laden fostered while comfortably evading capture in Pakistan.  The Pakistani judicial system even sentenced the doctor who helped the U.S. find bin Laden to 33 years in prison.

The U.S. donates billions of dollars to the IMF and Pakistan directly every year in an attempt to stabilize the economy and the tribal areas near Afghanistan. We have seen no meaningful advances.
 

Why would the outcome of this loan be any different? According to an August 2009 article on foriegnpolicy.com the U.S. had directly given Pakistan $22 billion between 2001-2009. And, “Of the $920 million in military support that the United States gave Pakistan in 2008 alone, only $300 million reached the Army.” While minsters and clerks have even more incentives to collect “perks” the soldiers who are the main defense against terrorism are ill-equipped and ill-trained. It is a wonder how long bin Laden lived undetected in Pakistan and even more wonderful that anyone believes that a loan to improve the economy (something the people really do need) will actually go to the right hands.

http://www.imf.org/external/np/sec/pr/2013/pr13322.htm

http://www.aljazeera.com/news/asia/2013/09/20139514647283238.html

http://www.transparency.org/gcb2013/country/?country=pakistan

http://www.foreignpolicy.com/articles/2009/08/11/assisting_corruption