EDITORIAL: The International Monetary Fund (IMF) has projected a growth rate of 3.2 percent in 2023 without taking account of the devastation caused by the floods, a stance reminiscent of an ostrich continuing to keep its head in the sand in spite of an earthquake with a magnitude of 8.9 on the Richter scale, the largest known shock in world history.
It is unclear whether this sustained disregard of the floods in Pakistan is deliberate or the outcome of indolence/incompetence. This projection is also at odds with the more realistic projection of 2 percent made recently by the World Bank in its report titled ‘Pakistan Development Update: Inflation and the Poor’, released less than a week ago subject to the country remaining on the path towards structural reforms agreed with the Fund.
The report’s author, Derek Chen, argued that “while relief measures are needed to cushion the impacts of flooding, it will be critical to ensure that these are targeted towards those most in need.
Chen goes on to state that “Pakistan has previously resorted to energy subsidies, but our analysis shows that such measures disproportionately benefit better-off households, while imposing unsustainable fiscal costs.
Going forward, the priority should be to tame inflation through sound macroeconomic policies. These should be accompanied by measures to provide targeted relief to those hit hardest by rising prices, including through expanded social protection programmes, and to address the distortions that discourage trade and productivity.”
The Fund cannot claim ignorance of the floods as their scale and extent were reported globally by the electronic and print media, with attention further focused on the scale of the devastation after the United Nations Secretary General, Antonio Guterres, recalled his visit to Pakistan during his address to the annual United Nations General Assembly meeting and stated that it represented “a level of carnage beyond imagination.”
One would therefore be compelled to conclude that the element of both was prevalent in the Fund’s sustained non-response to the floods - deliberately ignoring the devastation as well as indolence/incompetence in adjusting growth figures as a consequence of the floods.
One can no longer exonerate the Fund for sustained disregard of the floods by arguing that its sole objective is balance of payment support. On its website, the Fund notes that “poverty reduction and growth strategies are used in IMF-supported programmes to (1) link proposed programme policies with the member’s poverty reduction and growth objectives; (2) preserve national ownership of the poverty reduction strategy process; and (3) provide flexibility in scope and coverage to reflect particular country circumstances.”
This sentiment is reflected in all the mandatory quarterly reviews under the ongoing Fund programme. Additionally, the Fund notes on its website that “in February 2015, the IMF repurposed the Post-Catastrophic Debt Relief Trust, into the Catastrophic Containment Relief Trust.
Under the new trust the IMF can join international debt relief efforts for poor countries hit by the most catastrophic of natural disasters. It can also assist countries battling public health disasters — such as infectious disease epidemics — with grants for debt service relief.”
While the Fund’s stance is baffling yet one possible explanation maybe that it will not be amenable to any policy measure envisaging distortions that discourage trade and productivity, and imposition of unsustainable financial costs. In sum, the failure of Fund staff to take account of floods when projecting performance of key macroeconomic indicators is as inexplicable as it is unforgivable.
Copyright Business Recorder, 2022
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