A Pacific Island Pal
ONE: There is a very good analysis of the IMF by Paul Masson in “The IMF: Victim of its own success or institutional failures?” published in International Journal, Autumn 2007. Its focus is on how to reform the IMF and the problems involved, which recognises the need to reform the IMF. How successful that has been is open to debate.
In the article, Masson briefly mentions the Chiang Mei countries which are committed to monetary cooperation, possibly leading to the creation of an “Asian Monetary Fund” to rival or replace the IMF. I haven’t been following this proposal so I don’t know whether it has gone further, but it would be a good idea if an Asian monetary fund was established to serve the interests of Asia so long as (1) loans did not interfere into political systems; (2) impose too many conditions on countries; and (3) were fair and equitable.
According to Masson, the IMF acknowledges they have made mistakes such as fiscal restraint was overemphasized; too many conditions were attached to IMF loans; financial institutions should have been rescued rather than forced to close, as in the case of IMF loans to Indonesia, Korea and Brazil.
He also makes the point that “No international organization can serve as international lender of last resort because the amount of liquidity required will be dwarfed by private capital flows” He also concludes that “any reforms to the IMF are not going to change its position in the world economy.”
He argues IMF lending should be short-term and accompanied by fewer conditions. And IMF needs to strive for a “more equitable representation of countries in order to increase its legitimacy and improve decision-making.”
Useful reading for those wanting more information on the IMF – this one is a more positive appraisal of the IMF and attempts to look at ways the IMF can reinvent itself to re-establish credibility that it lost in the 1980s—2010 period.
It’s important to look at all sides of the debate concerning the IMF so better choices can be made. To listen to one side of the narrative is not enough.
TWO ……….. By contrast, the essay “Failure of IMF Programmes: Causes and Consequences” focuses on Pakistan and shows how an analysis of the IMF “structural Adjustment Program” failed to bring economic stability in Pakistan, and in fact contributed to worsening the economic situation. The history of this debacle goes back to before Imran Khan. Some Sri Lankan recently tried to link Khan’s ousting over so-called economic mismanagement with Sri Lanka – a step which was totally fallacious because it failed to recognise the fact that Khan inherited the economic mismanagement of previous leaders going back to the 1950s, much of which was intertwined with IMF loans. It is one the reasons why Khan went with the Belt Road and closer ties with China. With China’s help, Khan was turning things around for Pakistan’s economy, but the Americans didn’t like it, and it is one of the reasons behind the recent US coup in Pakistan, which, of course, the Americans deny. Antony Blinken said “
Blinken just came out with this statement about the new Prime Minister. Blinken wrote: “The United States congratulates newly elected Pakistani Prime Minister Shehbaz Sharif and we look forward to continuing our long-standing cooperation. … [We] view a strong, prosperous, and democratic Pakistan as essential for the interests of both our countries.”
The US government never endorsed Imran Khan’s leadership and there exists a US letter circulating in Pakistan saying Khan needed to be removed before US-Pakistan relations were restored. The letter found its way into the Pakistan military who wield too much power in Pakistani governance, and so they responded in America’s favour. So, Blinken’s statement needs to be contextualised to the history behind recent events. Clearly, the US didn’t want Khan in power and now they have their man Sharif who is facing money laundering charges. Blinken’s statement may look like nice words, but they are meaningless platitudes aimed at enhancing US national interests. An assumption in Blinken’s statement is that under Khan’s leadership, Pakistan wasn’t a strong, prosperous, and democratic which is blatantly untrue. If the US truly values democracy in Pakistan they would support fresh elections in Pakistan.
Anyway, here is the essay on IMF failures in Pakistan which is important for any Sri Lankan claiming the IMF will save Sri Lanka to read, because this could be the future path the Sri Lanka digs for itself.
Here is the source and an abstract.
Journal of Business Strategies, Vol.7, No.1, 2013, pp 77–86 Failure of IMF Programmes: Causes and Consequences Manzoor Ali Isran*, Samina Isran & Najma Noor Phulpoto, SZABIST, Karachi
The paper attempts to find out causes and consequences of the adoption and implementation of IMF programmes since 1988. Basically Pakistan singed
different agreements with IMF to improve its economy through the adjustment of monetary and fiscal policy during the decade of 1990’s. The in-depth analysis of Structural Adjustment Program shows that IMF policies totally failed to bring any macroeconomic stability. Instead they contributed towards worsening of the economic situation, with dire consequences for vulnerable sections of society besides producing negative effects for the political system, resulting in the breakdown of nascent democratic system again and again. The primary reason for the negative effects is attributed to inflationary nature of structural adjustment programmes. The attempt to control demand thorough demand deflation by forcing the recipient country to devalue currency, increase interest rates, withdraw subsidy and adopt austerity measures through down-sizing and cutting expenditure on unproductive sectors of economy and sell public sectors enterprises to the private sector. Such an approach of IMF has contributed to the closure of industry and business, giving rise to scourge of unemployment and inflation.
THREE …. The only parallels I can see between what is happening in Pakistan and Sri Lanka is that both countries have leaders the US doesn’t like. If they have overthrown one leader in Pakistan, it raises speculation as to whether the US has played any role, covertly, to destabilise Sri Lanka to bring on a crisis. I use the word “speculation” advisedly. I have no evidence other than drawing a parallel.
The Pakistan case study is particularly important for Sri Lanka because of the similarities in the South Asian context.
- BBC – https://www.bbc.com/news/world-asia-61055210
- CNN – https://edition.cnn.com/2022/04/09/asia/imran-khan-voted-out-pakistan-prime-minister-intl-hnk/index.html
- Bloomberg -https://www.bloomberg.com/news/articles/2022-04-09/pakistan-pm-imran-khan-loses-confidence-vote-ousted-from-power