In recent days there is increasingly appearing in both print and electronic media discussion about how to escape another International Monetary Fund (IMF) programme.
For instance, in an article ‘Urgent reforms proposed to avert another IMF loan’ recently published in Dawn, quoted minister for planning, development, and special initiatives, Ahsan Iqbal, whereby he emphasised the importance of enhancing exports, and not subscribing to another IMF programme, as ‘“Pakistan’s development, economic sovereignty and even national security now hinge on one thing: how fast we can grow our exports and move to an export-led growth model… [and that] “the only way to break free from foreign crutches and avoid the next IMF programme is to rapidly increase our exports and build strong foreign exchange reserves”.’
It is, therefore, very hard to see how the country could expand its exports – in addition to making adequate level of social protection spending – for instance, while policy – under IMF programmes, World Bank development policy loans, and domestically – continues to be neoliberal, austerity-based, and pro-cyclical in nature
While expanding exports is indeed an important policy goal, yet the neoliberal, and austerity-based policy framework, both within and outside of the IMF programmes, and World Bank development policy loans – where the latter also emphasize similar structural adjustment policies as being adopted by IMF – over the last four decades or so has overall not allowed reaching any sustained macroeconomic stability, nor inclusive economic growth, while the role of the public sector has continued to diminish, all of which are otherwise important factors for enhancing domestic production, exports, and overall reaching much-needed appropriate level of productive, and allocative efficiencies.
READ MORE:IMF programme widely perceived as ‘anti-growth’: Dar
A (2008) ‘The University of Chicago Press’ published book ‘Beyond the World Bank agenda: an institutional approach to development’ pointed out with regard to World Bank adopting IMF’s neoliberal agenda the following: ‘The IMF’s commitment to the neoliberal model was in place long before 1980, but the World Bank’s shift in this new direction was more sudden.
Boas and McNeill argue that the foundation of adjustment was present in the 1970s. In particular, there was growing criticism of state-led development models by neoliberals as Peter Bauer… The appointment of Ernest Stern in July 1978 as the vice president in charge of operations and as chair of Loan Committee was crucial introduction of these policies inside the Bank. …
On May 10, 1979, in Manila, [the then president of the World Bank] McNamara stated: “In order to benefit fully from an improved trade environment the developing countries will need to carry out structural adjustments favoring their export sectors. I would urge that the international community consider sympathetically the possibility of additional assistance to developing countries that undertake structural adjustment for export promotion…” …Whereas McNamara saw the opportunity to increase the loans and profile of the Bank, Stern saw an opportunity for his new policy framework. After considerable discussions, the directors approved a moderate allocation of Bank funds – roughly 5 to 6.5 percent of total IBRD-IDA loans. Shortly thereafter, a series of changes quickly pushed adjustment to the center of the new agenda.’
Moreover, there has been an onslaught of policy narrative being carried in the policy corridors of government, IMF, and World Bank – and overall multilateral institutions – which even though there is a significant amount of evidence to the contrary, have continued to favour neoliberal- and austerity-based structural adjustment programmes. Here, although the IMF for instance has at least in words distanced itself for the structural adjustment nature of their programmes, and instead posed its programmes to support inclusive economic growth, after strong backlash to these neoliberal, and austerity-based programmes especially in the wake of Global Financial Crisis (GFC) 2007-08, yet record in terms of the actual nature of conditionalities in IMF programmes strongly negates this impression.
In this regard the book ‘A thousand cuts: social protection in the age of austerity’ for instance pointed out: ‘After half a century of undisputed dominance as the core actor in global economic governance, the IMF’s role and credibility was seriously questioned in the first two decades of the twenty-first century.
In the early 2000s, the IMF’s handling of economic crises and the subsequent design of reform programs came under fire for failing to deliver stability and growth. …Noting this demise, anthropologist and activist David Graeber… pronounced that “the IMF is rapidly approaching bankruptcy, and it is a direct result of the world-wide mobilization against them. To put the matter bluntly: we destroyed it.”’
The book also pointed out that in the wake of the GFC 2007-08, cash injections for instance to the tune of $750 billion, resurrected the multilateral institution, whereby it quoted the then managing director of IMF as ‘Reflecting the significance of this cash injection, its managing director at the time, Dominique Strauss-Kahn, could safely proclaim that “the IMF is back”…’
In the wake of this comeback, the narrative of IMF did change, as the same book pointed out: ‘…the re-emergence of the IMF was also coupled with a sea change in the organization’s rhetoric on the ways in which it offers financial assistance. As former managing director Christine Lagarde told journalists, “Structural adjustment? That was before my time. I have no idea what it is. We do not do that anymore.
No seriously, you have to realise that we have changed the way in which we offer our financial support”… The oft-repeated “we do not do that anymore” mantra is far removed from what observers have long some to expect from the IMF, and is a clear departure from the reputation that normally precedes it – prescriptions of fiscal austerity, trade and current account liberalization, public sector layoffs, and privatisations of state-owned enterprises…’
Having said that, on ground as the same book, among significant level of other research pointed out the lack of evidence to support this policy shift whereby as pointed out in the same book, IMF emphasizes ‘Instead, the organization now acknowledges the importance of countercyclical spending to sustain economic activity… the potential utility of capital controls… the perils of high income inequality… and the adverse consequences of inadequate social protection policies…’ on the contrary loan conditionalities – like in the ongoing extended fund facility (EFF) programme, and standby arrangement (SBA) that the country was following prior to EFF – continue to be what it claims to have moved on from in its rhetoric.
The same book pointed out in this regard: ‘Several studies suggest that the practice of IMF programs in recent years largely reflects business as usual… For example, the authors of this book revealed that of the 48 programmes commencing between January 2010 and May 2016, 58 percent were fiscally contractionary in the initial years of the program, and even more became contractionary in their second, third, or fourth years…
A closer look at the IMF lending programs – providing financial lifeboats to countries in economic turmoil – suggests that past mistakes are being repeated.’
Yet, this knowledge about the misgivings of IMF programmes could not unfortunately penetrate policy perception in the corridors of domestic policy corridors, where apparently under the strong influence of ‘Chicago boys’-styled local policymakers, policy continued to remail neoliberal, and austerity-based, and no significant challenge came to undoing this both in domestic policy, and while negotiating an IMF programme. It is, therefore, very hard to see how the country could expand its exports – in addition to making adequate level of social protection spending – for instance, while policy – under IMF programmes, World Bank development policy loans, and domestically – continues to be neoliberal, austerity-based, and pro-cyclical in nature.
(To be continued…)
Copyright Business Recorder, 2026
The writer holds a PhD in Economics degree from the University of Barcelona, and has previously worked at the International Monetary Fund. His contact on ‘X’ (formerly ‘Twitter’) is @omerjaved7
Comments