IMF deal 2023
Pakistan’s decision to accept IMF conditions for early resumption of next tranche is being termed as sensible choice but the matter is hardly settled.
A look at the globe will show how our economic managers have enough space to get a deal that could be thousand times better than what is being projected and implemented in next mini-budget.
Here is deal for Pakistan like US, UK and the EU under the logic of what is good for the goose is good for the gander.
Pakistan can print money equal to $200bn. Following America’s $369bn subsidy to its industry under Inflation Reduction Act, EU is bringing a matching program to stop relocation of its industry to America.
EU has already €672bn in state aid for Germany (53%), France (24%) and Italy (7%) in 2022 to offset fallout of cost of living causing protests in other members.
Without creating space for Pakistan matching $1T plus US-EU packages, IMF will fail in its duty from Western Tsunami of deindustrialization, unemployment, fall in exports, revenue, debt and poverty.
Write off 80% total debt of Pakistans because it is fictitious. It is generated on paper by international financial system through fiat currencies, their printing and exchange rates.
The money printed in West does not come to Pakistan so there is no question of resultant debt and its return.
Obama, Trump and Biden added $21.5T to US debt and the money was physically distributed in American economy, public and businesses while exporting the fallout of printing the dollars in form of increase in debt and inflation to Pakistan like rest of the world.
Currency exchange rate should be Rs 162/US dollar for next ten years. India’s currency is around 82rupees (81.7/$) with 789MT gold reserve.
Pakistan has 64MT gold reserves worth $3.4bn (WGC).By adding 14MT gold and linking rupee to gold, the proposed exchange rate is possible.
Putin added $600bn gold to country’s reserves and value of ruble has gone up during war despite sanctions.
India and Russia are trading gold backed ruble. Pakistan can proportionately cut its debts, inflation and cost of living more as compared to loans and their interests.
It is job of IMF to stop export of Western inflation to Pakistan. Inflation is now 500 percent higher in US after Biden took office (James Smith US Congress, 22 Nov 2022).
Manchin opposed Biden’s $2T Build Back Better Act to cut inflation and debt. Same Manchin defended IRA subsidy in Davos 2023 for American industry.
In case of sovereign default, Pakistan will not cross 40% in terms of CPI, rupee devaluation etc (IMF or no IMF, 17 Jan 2023 Pakistan Observer).
Tax collection is part of Western policy. UK did not collect £47bn tax. Liz Truss mini-budget gave £30 tax cuts to rich (Revealed: the £30bn cost of Liz Truss disastrous mini-budget, 13 Nov 2022, the Guardian).
It will cost taxpayers £77bn (How much market chaos did mini-budget cause, 17 Oct 2022 BBC).
The budget was unlawful without the approval of Office of Budget Responsibility but Tory government is not changing it after IMF urged UK government to reconsider tax cutting plans (27 Sept 2022, the Guardian).
Nation Debt should be ended not accrued which Thatcherism and Reaganomics has failed to do in West after 1980 crony capitalism reforms.
For party donations, politicians refuse to collect taxes (US GoP led Congress bill ends 87,000 tax inspector jobs).
They keep businesses happy by losing 40% annual revenue by keeping wages stagnant for last 50 years, delink wages from inflation, resort to privatization, end pensions, and adopt for-profit education, healthcare and transport.
That is why West pushes for increase in debt limit instead of ending after the reforms which fuels prices.
Modi has adopted similar corrupt western economic policies to assure continuity and stability to West as an alternate to China and in exchange for continuation of single party government in India for next 50 years (LDP, Japan).
Hunger plagues India but there is no food shortage (107th GHI, 28 Oct 2022, the Telegraph).
Government writes off $163bn in bank loans (30 Dec 2022, the Straits Times). The corrupt pro-business policies are given in exchange for party donations, which are now 3.2% of national GDP while 800M Indian’s struggle to get wheat and rice just like West’s democratic food stamp programs.
IMF deal for Pakistan should avoid Barber’s 1972 UK mini-budget ending 6P a pint of milk, £5,158 average price of house and 35p/8p a gallon/liter of petrol resulting in UK IMF package ended by Thatcher in 1979.
In 1972 barrel of oil was $1.84. Today it is $19. Maths will show Pakistan can proportionately have 1972 prices but it is only possible if public is in control of the state, its central bank and economy with a 4- year term of parliament, maximum 2 terms for a PM and judiciary with powers of judicial review.
The challenge is to overcome greed, corruption and injustice while challenging global economic system and financial institutions for stronger and independent Pakistan.
—The writer is senior political analyst, based in Islamabad.
