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Tainting IMF’s Georgieva: U.S. Campaign to Tighten the Grip on Bretton Woods Institutions

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In an unprecedented development, the then-Chief Executive of World Bank, and now International Monetary Fund (IMF) Managing Director Kristalina Georgieva was accused on September 16, 2021 (alongside her advisor Simeon Djankov) of applying pressure on her staff to boost China’s position in the bank’s “Doing Business 2018” publication, based on an independent investigation conducted by WilmerHale.

The Substance of the Accusations

According to the mentioned law firm, it was hired by the lender’s International Bank for Reconstruction and Development on January 20, 2021 to review the internal circumstances that allegedly led to the data irregularities due to Georgieva’s ill judgment concerning Beijing.

As the WilmerHale report suggests, Chinese officials repeatedly voiced their discontent over the 2017 Doing Business report, claiming that it failed to adequately reflect the scope of Beijing’s reforms in addressing Jim Yong Kim, the then-President of World Bank, and other top executives at the bank.

When it became apparent that the 2018 draft report would suggest that China dropped in ranking, the bank’s staff began discussing options to improve Beijing’s position, including through adding data from Taiwan and Hong Kong into the mainland’s rating, says the report.

Georgieva, who is reported to be overseeing the issue since October 18, 2017, rejected any incorporation of Hong Kong data into the “Doing Business 2018” report for political reasons—yet, as WilmerHale’s findings argue, she asked “Mr. Djankov” to manage the final publication and work along the way to “identify changes to China’s data that would raise the country’s score.”

In the process of putting the 2018 edition together, the people involved concluded that adjusting China’s “legal rights indicator” was an “ideal vehicle” due to a variety of different opinions related to the effect of Chinese law, as the WilmerHale report claims. This apparently helped China keep its prior position in the bank’s ranking and gave “Mr. Djankov” green light to authorize publication.

Apart from vaguely stating that some staff on the Djankov’s team said that working under his supervision could be “emotionally harrowing,” the report accused both Mr. Djankovic and Ms. Georgieva of pressuring their staff “to make specific changes to China’s data points in an effort to increase its ranking.”

The findings also point to the fact that the final weeks before the “Doing Business 2018” was released at the end of October 2017saw the World Bank’s team, “presumably at the direction of” then-President Jim Kim, being under “both direct and indirect” pressure “to change the report’s methodology in an effort to boost China’s score.” This came to happen precisely at the same time when Mr. Kim and Ms. Georgieva were engaged in delicate negotiations with the Asian country, the U.S. and other members to raise the bank’s capital.

In the end, Beijing accepted a smaller shareholding in the bank than it sought as well as higher rates on bank loans that it received as part of a plan to defuse opposition from the Trump administration. According to the World Bank’s announcement made in 2018, a $13 billion paid-in capital increase boosted China’s shareholding stake to 6.01% from 4.68% but also brought lending reforms that will raise borrowing costs for higher-middle-income countries, including the Middle Kingdom.

The Road to Washington’s Wrath is Paved with Good Intentions

It is not a secret that the nature of the work conducted by top rank officials at the World Bank frequently requires geopolitical calculation and sensitivity. The same is true for Jim Yong Kim, nominated by President Barack Obama in 2012. Kim was dedicated to building bridges between the bank and the Asian Infrastructure Investment Bank (AIIB) established by China and the Asian country itself. Balancing between the two biggest economies in the world is a welcomed must amid a changing global economic architecture, not anything abnormal at all.

When it comes to the former Vice-President of the European Commission, although the alleged actions were conducted while Ms. Georgieva was working for the World Bank, they have been referred to the ethics committee’s board of directors at her new job with IMF. Hence, the WilmerHale report comes nearly two years after becoming the first head of the IMF from an emerging market and shortly before the most extraordinary global economic crisis in the Fund’s 76-year history, triggered by the COVID-19 virus.

Moreover, during these testing times, Ms. Georgieva has been overseeing the expansion in the reserve assets of 190 member countries, with $650 billion allocated to tackle the pandemic.

While the U.S. is the largest shareholder in the Washington-based IMF and World Bank, which means it enjoys veto powers over major decisions, the country is in the process of analyzing the “serious finding” in the WilmerHale report. As the Treasury Department’s spokeswoman Alexandra La Manna told Reuters, it is no secret that many GOP lawmakers have opposed expanding support for the mentioned institutions.

Notably, three members of the House Financial Service Committee, U.S. Representative Andy Barr (KY-06), U.S. Representative French Hill (Ar-02) and U.S. Representative Anthony Gonzalez (OH-16) sent a letter, dated September 22, 2021, to U.S. Treasury Secretary Janet Yellen to review and report to Congress about WilmerHale’s findings within 30 days.

The U.S. politicians are especially interested in obtaining information concerning “Director Georgieva’s interactions with Chinese representatives at the Fund during her deliberations and decision-making process leading up to the August 2, 2021 announcement by the IMF Board of Governors to approve a $650 billion general allocation of Special Drawing Rights (SDRs), which included an estimated $42 billion to the People’s Republic of China.”

What is especially interesting is the fact that although lawyers at WilmerHale made it clear that their “review should not be read to imply that there was any inappropriate conduct on behalf of any Chinese or other government officials,” the GOP signatories of the letter to Ms. Yellen outlined concerns with how “the Chinese Communist Party, in pursuing its self-interest, undermines and infiltrates multilateral institutions such as the Fund, the World Health Organization, and the United Nations.”

Moreover, they also asserted that “China feels entitled to a greater say in how these international organizations operate,” while, in their view, “its lack of commitment to multilateral values demonstrates why it must not be allowed to.”

The attempts to assassinate the IMF chief’s character went beyond political circles, as one of the most influential financial magazines also felt the need to weigh into the witch hunt against Ms. Georgieva.

“The head of the IMF must hold the ring while two of its biggest shareholders, America and China, confront each other in a new era of geopolitical rivalry,” The Economist editorial warned. “The next time the IMF tries to referee a currency dispute, or helps reschedule the debt of a country that has borrowed from China, the fund’s critics are sure to cite this investigation to undermine the institution’s credibility. That is why Ms. Georgieva, an esteemed servant of several international institutions, should resign,” the editorial concluded.

Kristalina Georgieva’s fate seems to be already sealed. Before the IMF and World Bank annual meetings to be held between October 11 and 17, U.S. Treasury Secretary Janet Yellen reportedly declined to answer phone calls from Ms. Georgieva, declaring her to be a persona non grata.

In Defense of Reason

Along with these concerted attempts to tarnish the good name of the IMF’s Bulgarian female managing director, some voices profoundly disagree with the accusations against her.

Shanta Devarajan, who was involved in overseeing the World Bank’s “Doing Business” report in 2017, called WilmerHale’s findings concerning the accusations of applying “undue pressure” by Ms. Georgieva on her staff being “beyond credulity.”

Devarajan, who currently serves as professor of development policy at Georgetown University, sent a series of tweets where he argued he never felt any pressure to change Beijing’s scores, rather accusing WilmerHale lawyers of using only half of his statements from an hours-long interview.

Georgieva’s “direction was to verify the China numbers, making sure that China received credit for the reforms they undertook, without compromising the integrity of Doing Business. The Bank’s lawyers left out the latter phrase,” he said, adding that a rush to judgment on Georgieva’s prior role as World Bank CEO “is misguided.”

“The changes to China’s score were either correcting coding errors or judgment calls on questions where judgment was required,” explained Devarajan, who was a senior director in the World Bank’s Development Economics group until 2019.

The former World Bank chief economist and Nobel laureate Joseph Stiglitz also called the WilmerHale investigation to be “a hatchet job”, denying that he’d heard of any complaints from the Doing Business staff related to feeling pressure from Ms. Georgieva in 2017.

“The fingerprints aren’t there. The report does not accurately reflect what happened,” concluded Stiglitz, who also questioned why it failed to mention the current president David Malpass when data irregularities involving Saudi Arabia’s rating occurred under his leadership.

Jeffrey Sachs, who is director of the Center for Sustainable Development at Columbia University, did not mince his words in his recent article in Financial Times, saying with conviction that “The heated attack against IMF managing director Kristalina Georgieva is not really about the alleged sanctity of World Bank data or about the quality of her management.”

According to Sachs, “It is about the role of China in a Washington-based multilateral institution.” Besides, the world’s famous economist added that the reason for this state of affairs is the fact that “many in the US Congress want Georgieva out because she is not a sworn enemy of Beijing.”

Interestingly, while China’s ranking stayed the same in 2018 as the prior year’s at No. 78, after Ms. Georgieva departed from the World Bank, Beijing was ranked 31st in 2020 and 25th in the unreleased 2021 report, which was now cancelled—all of this under the leadership of Republican David Malpass.

When it comes to Ms. Georgieva, she disagreed “fundamentally with the findings and interpretations” of the WilmerHale report.

“Let me be clear: the conclusions are wrong. I did not pressure anyone to alter any reports. There was absolutely no quid pro quo related to funding for the World Bank of any kind,” the IMF chief wrote in a statement.

Ms. Georgieva also highlighted her effort to prevent Hong Kong data from being added to the “Doing Business 2018” report as a sign of her commitment to preserving the integrity of World Bank data.

As of today, the “Doing Business” report’s publishing is cancelled, which could result in making some investors life more complicated when it comes to assessing where to put their money, as Reuters reports.

The report was the World Bank’s leading publication, which ranked countries based on their regulatory and legal environments, ease of business start-ups, financing, infrastructure and other business climate measures. Due to this fact, it was closely monitored by governments around the world looking to attract more FDI in accordance with their place in the ranking.

“Going forward, we will be working on a new approach to assessing the business and investment climate,” the World Bank informed.

The Bretton Woods Institutions’ Original Sin and BRICS

While colonialism seems to be the thing of the past, the sad reality is that inequality between the Global North and the Global South persists. This is happening due to power imbalances inscribed in the world economy and maintained by the developed countries, which claim to have the right and responsibility to set the rules of international trade and finance for the rest of the world.

To serve “their own economic interests, quite often at the expense of everyone else,” to quote economic anthropologist Jason Hickel, the Global North uses the IMF and the World Bank for this purpose.

By tradition under an unwritten transatlantic agreement, Europe has to select the managing directors of the IMF while the U.S. chooses presidents of the World Bank. Kristalina Georgieva is the second woman to have run the IMF, following the current European Central Bank President Christine Lagarde.

In the BRICS Sanya Declaration issued in April 2011, the members declared that “the voice of emerging and developing countries in international affairs should be enhanced.” Unfortunately, a month later, when Western countries backtracked on their 2009 promise to “appoint the heads and senior leadership of the international financial institutions through an open, transparent and merit-based selection process” by deciding to replace Dominique Strauss-Kahn with the then France’s Finance Minister Lagarde, the emerging economies accepted the fact that Europe will remain to pick the IMF’s Managing Director.

By doing this, Europe decided to discriminate against more than 90% of the world’s population once again. This reduced the legitimacy of the institution, as there was no hope that Legard would step down before 2016 to make place for a non-European person.

The very same scenario repeated in 2012 when Roberto Zoellick announced he would step down as World Bank President. “We will take a position together with the BRICS, making a common choice,” Brazil’s Minister of Finance Guido Mantega declared, giving a glimmer of hope that Ngozi Okonjo-Iweala from Nigeria would win broad support among the Global South countries. Sadly, the U.S. candidate, Jim Yong Kim, got this job with the not insignificant help of the Russian government.

In this way, we are faced with an incredibly undemocratic situation where the U.S., G7 and the EU control the veto process in the IMF and the World Bank to the detriment of the majority of the world’s population. In other words, “For every vote that the average person in the Global North has, the average person in the Global South has only one-eighth of a vote (and the average South Asian has only one-20th of a vote),” as Hickel argues in his Al Jazeera article published on November 26, 2020, titled Apartheid in the World Bank and the IMF.

Bearing in mind that both the IMF and the World Bank were founded back in 1944, “these institutions were designed with colonial principles in mind, and they remain largely colonial in character to this day,” the scholar concludes.

Ever since an informal meeting of the foreign ministers of Brazil, Russia, India, and China at the Brazilian mission to the United Nations in New York, which took place on September 20, 2006, the growing discontent about the distribution of power in the IMF and the World Bank became the main unifying factor of the group whose emergence “can be understood as a continuation of the decolonisation process,” as Jyrki Käkönen declares in his academic article Global change: BRICS and the pluralist world order, published in Third World Thematics in 2019.

It was the economic crisis of 2008 that allowed the BRIC nations to openly state their dissatisfaction when in the São Paulo communiqué, jointly issued by Finance Ministers, they made it clear that “reform of the International Monetary Fund and of the World Bank Group should move forward and be guided towards more equitable voice and participation balance between advanced and developing countries.”

A similar request was made in 2009 in Horsham, where the BRICs called it “imperative” that successive heads of the IMF and the World Bank be selected through “open merit-based” processes, irrespective of nationality or regional considerations.

The grouping’s struggle to reform the IMF culminated in 2010 when the Board of Governors approved quota reform—including a quota shift by more than 6% in favor of large emerging economies. The IMF hailed these steps as “historic” to point out that they represented “a major realignment in the ranking of quota shares that better reflects global economic realities and a strengthening in the Fund’s legitimacy and effectiveness.”

We Must Not Harbor Any Illusions

Despite the significant win of the BRICs regarding quota reforms, the U.S. waited five years to agree on reforms that were endorsed by almost all the members of the IMF.

The damage done by the prolonged reluctance to push the reforms through the U.S. Congress has significantly impacted the county’s image and credibility. As George Osborne, the then the British Chancellor of the Exchequer, concluded at that time, it was a “tragedy that an agreement reached across all the members of the IMF was being blocked by the US Congress.”

Regardless of its multilateral commitments, the U.S. delay resulted in keeping the rest of the world hostage to the whims of its Congress, which has limited any prospect of further reforms, especially important for the smaller economies.

2010 were supposed to be part of a more significant change. Still, the zero-sum nature of this sensitive development and the increased competition between the U.S. and China reflected in the recent attacks on the IMF’s Kristalina Georgieva bode ill for the future as far as Washington’s constructive role within the organization is concerned.

With the formation of China’s Asia Infrastructure Investment Bank (AIIB) and BRICS’ New Development Bank, which recently admitted the United Arab Emirates, Uruguay and Bangladesh as members in its first expansion push, leaders in the large emerging economies would be well-advised to have no illusions about the U.S. role in the Bretton Woods Institutions and its rather apparent intentions.

The IMF and World Bank are becoming too rigid, and they do not seem to be fit for purpose in the 21st century. That is why the acceleration of the delegitimation process has to gain new momentum and more attention put on the non-Bretton Woods institutions in due course.

From our partner RIAC

London-based foreign affairs analyst and commentator, who is the founder of AK Consultancy and editorial board member at the peer-reviewed Central European Journal of International and Security Studies (CEJISS) in Prague.

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The suffocating economy of Iran

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Iran’s economy is on a roller coaster. The past year saw a dramatic rise in inflation rates and a historic fall in the value of the rial. The protests which followed the death of a 22-yar old Kurdish woman Mahsa Amini have magnified the creaks in the country’s economy.

On  January 22, The Iranian rial was selling at an exchange rate of 450,000 against the greenback, an all-time low. The rial has lost 29% of its value since the time the protest started. Iran’s statistical agency reported an inflation rate of 48.5% in December 2022, the highest level since 1995. November data recorded food inflation of above 70% in 12 provinces of the country.

Reports from the country suggest that more than half of the population is living below the poverty line due to spiraling prices. As per the latest forecast, the World Bank predicts a GDP growth of 2.9% for Iran in 2022 which will slow down to 2.2% in 2023 and 1.9% in 2024 owing to “slower growth in key trading partners and new export competition from discounted Russian oil”. However, the government’s response to the bleak economic indicators so far had been subtle and unperturbed.

Causes

The unilateral withdrawal of the US from the nuclear deal in 2018 and the sanctions that followed on oil exports and international banking has put heavy stress on the country’s economy.

 The country’s government debt-to-GDP ratio rose to 45% in 2020. According to World Bank, Iran’s unemployment rate reached 12.2% in 2020 before narrowly dipping to 11.5% in 2021. Iranian daily Etemad had reported that at least 23 workers have committed suicide since March 2022 in the country due to reasons like dismissal, punishment, or threats.

The government lifted import subsidies for essential goods in April 2022, to ease the pressure off the strained government budget, which subsequently triggered rapid spikes in food prices during May-June.

The Federal Reserve in November tightened its control over Iraqi commercial banks to restrict the illegal siphoning of dollars to Iran and other Middle-East countries. The new regulations blocked a huge chunk of daily dollar wire transfers to Iran. The Taliban takeover in 2021 had previously blocked access to hard currency to Iran via the Afghan route.

Amid the uprising, European Parliament approved a resolution designating the Iranian militia, Islamic Revolutionary Guard Corps (IRGC) a ‘terrorist’ organization. It also called for sanctions on Supreme Leader Ayatollah Ali Khamenei, President Ebrahim Raisi, and others. The US and UK too imposed fresh sanctions on Iran.

Response

Iran retaliated on January 25th by imposing sanctions on 34 British and European individuals and entities.

Former Central Bank of Iran governor Ali Salehabai had been sacked in December due to failure to control the rapid depreciation of the rial. According to analysts in the region, the Central Bank is injecting dollars into the market to thwart further depreciation.

In late January, the Central Bank decided to raise the maximum amount of currency that can be sold to individuals annually from 2000 euros to 5000 euros, to instill confidence and ward off fears about the availability of currency. The cap was initially introduced to stabilize the currency after the US pull-out of the nuclear deal in 2018.

Iran has not resorted to austerity to tide over the crisis. Instead, President Ebrahim Raisi presented a noticeably enlarged national budget in January to boost growth. Valuing 21,640 trillion rials, the budget is 40% larger than the previous one. The Islamic Revolutionary Guards Corps (IRGC) was allocated $3 billion registering a 28% rise over the last year, in a taunting message to the west.

Recently, Iran introduced gold coin certificates in the stock market to raise cash and mitigate inflation. The government is desperate to raise cash as the government budget is posting a deficit of $9.75 billion. Critics point out unrealistic revenue estimates riding on oil sales and over-optimistic tax collection figures.

To raise revenue, Iran has increased its oil exports to China to more than 1.2 million barrels per day over the past three months. The sanctions have in effect caused Iran to warm up to western rivals like China and Russia. Iran and Russia are reportedly in talks over the introduction of a stablecoin, backed by gold, to bypass western sanctions in cross-border transactions.

Iran’s response to the looming economic crisis was devoid of any extreme desperation. The government took all necessary steps to keep the dread within bounds. The present security situation in the country could go haywire if the economy collapses.

It remains to be seen how fast the government can ensure reliable alternate arrangements in place to sustain the economy. If not immediately, chances are high that the country may drift to panic mode.

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Prospects of Vietnam’s Economic Growth in 2023

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The ongoing  war in Ukraine and increasing commodity prices across the world have impacted the developing countries. Countries in Asia which were recovering from the COVID-19 impact on their economies have to rework their recovery process by looking for alternate supply chains and reducing their financial responsibilities towards social sector through budgetary management. Among the developing economies in Asia , Vietnam showed an economic growth of nearly 3 per cent  even when many of the countries were witnessing  recession and reduced production because of adverse impact of COVID-19 .The stimulus packages that the governments across the world have to give to the manufacturing sector to accelerate production and meet the demands of the people. In a report released by World Bank in August last year it was stated that the Vietnamese economy is likely to grow by nearly 7.2 per cent in 2023 and it is going to sustain itself in 2024 with a likely growth projection of 6.7 per cent. These are encouraging signs .Few of the sectors which might be accelerating the growth process would be in the field of footwear and electronics. Vietnam itself has been undertaking strong anti corruption measures so as to facilitate stronger economic fundamentals and recovery from the COVID-19 impact.

The economic growth of Vietnam has been accelerating and the agricultural sector has been productive in ensuring food security for Vietnamese citizens. As per one of the estimates this sector contributed more than 14 per cent in national gross domestic product and has engaged more than 35 per cent of youth in the year 2020. This sector also earned valuable foreign exchange of more than U.S. dollar 48 billion. One of the interesting achievements of Vietnam has been increasing life expectancy, and its universal health coverage which covers more than 87 per cent of the population.

As per the plan of action which has been envisaged  for Vietnamese economy by its leadership it aspires to become a high income country by the year 2045. It is expected that with the sound economic fundamentals and more than 5.5 annual average per capita growth for the next 2 and a half decades it can reach that milestone. Vietnamese population is also young and is adapting itself for digital economy and building core fundamentals for its membership in different regional economic organisations such as RCEP and CPTPP.The bilateral free trade agreement with EU is also facilitating its growth in several sectors.

There have been significant structural improvements ushered through policy documents in terms of improving financial architecture, accepting global norms related to climate and environment, comprehensive security for population against poverty , and extensive investment in infrastructure development both in rural and urban areas.

In one of the articles written  in Bloomberg it has acknowledged that Vietnam is  now is one of the Asia’s  fastest growing economies which has grown to 8.02% last year and it even surpassed  government assessment of 6 to 6.5 per cent growth. The article also acknowledged the fact that manufacturing has been growing to near 10 per cent mark in comparison to last year and there is strong development in the services sector as well. Among the economies Vietnam’s  inward foreign direct investment has also been doing quite well and it has received nearly US  $27.72 billion last year .Asian Development Bank has forecasted that Vietnam is going to grow at the rate of 6.3% in the year 2023. Also the unemployment rate has reduced and with inflation clearly under 5 per cent , showcases that the long term decisions which we have taken with the initiation of Doi Moi(economic liberalisation process )  in 1986 has been bearing fruits.

In terms of sectoral assessment, the real estate as well as construction  sector ,the growth was about 7.78 per cent last year and the services sector growth was closer to 10 per cent. There have  been increase in exports last year as well and an increase of 10.6% was noticed. One of the core arguments which have been given with regard to Vietnam’s impressive growth has been related to trade liberalization, increased deregulation and improvement in the ease of doing business, investment in human resources and stable government were seen as critical attributes for this impressive growth in Vietnamese economy.

Major companies in footwear, electronics, and mobile production have invested in Vietnamese economy and few of the companies have shifted base from China to Vietnam. Improved  congenial economic environment has been appreciated by companies such as Adidas, Nike and Samsung to list few.

Owing to the development of new kind of digital technologies and better consumer awareness Vietnam is preparing itself for a major impetus in the E- commerce sector and therefore has been making extensive changes in digital based economy and more stress on science and technology development. Vietnam has acknowledged the fact that with the changes in sectoral composition of the economy, it is pertinent to develop necessary skill power and human resources which can seamlessly integrate Vietnam into global value chains and also help the services sector in exploring new markets.

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The Crippled Economy

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Lack of money is the root of all evils. Facts do not seize to exist because they’re ignored.

Lack of money is what Pakistan is experiencing and dealing with every now and then for the major part, since it came into existence either due to incompetence of our political leaders, their corruption, fighting wars of someone else or due to lack of long-term vision. Pakistan is currently in the middle of a turmoil trying to recover from devastating floods of 2022, facing the after effects of the withdrawal of USA from Afghanistan in the form of resurgence of terrorism, dealing with the political chaos created by the politicians who claim to be leaders of the state. Another yet most important, severe and devastating challenge that Pakistan is facing is its economic downfall. In one sense the lack of money is the root cause of all the problems mentioned above except the political chaos.

The economy of Pakistan, like a battle-hardened warrior has built resilience battling several challenges over the course of seventy years and is trained to survive but the recent political turmoil and the difficulty caused by nature (Floods), the burden of debts repayment, the threat of resurgence of terrorism and international indicators pointing towards an economic recession in 2023 has almost crushed the backbone of Pakistan’s economy.  

World bank has recently released its latest report forecasting Pakistan’s Gross domestic product (GDP) to grow at only 1.7% for the fiscal year (FY) 2023 that is less than the half of what it predicted to during last June (4%). It has also predicted a near to recession economic situation of the world economy characterized with high inflation, increasing interest rates and the circumstances caused by the Russian Invasion of Ukraine.

Pakistan must reportedly payback 73$ Billion in the next three years till the end of FY2025 and central bank of the country also known as State Bank of Pakistan currently has Foreign exchange reserves of about only 5.6$ billion. This debt repayment is the key challenge for Pakistan’s economic survival and other challenges such as ever-increasing inflation, high interest rate, the growing unemployment, the decrease in imports are all byproducts of the main challenge. The threat of a possible default is becoming evident and is looming over fiscal horizon.

Monsoon on Steroids, a phenomenon directly linked with climate change played havoc with Pakistan. These floods added a profound risk to the country’s economic outlook. The country lost infrastructure worth of billions of dollars and floods effected 33$ million people and 1700 people lost their lives. According to Ministry of Planning and development of Pakistan, Pakistan has faed the loses of more than an estimation of 10$ billion. The catastrophe of floods also played with agroeconomics as crops were destroyed causing destruction of agriculture sector which makes up to 24% of country’s GDP. A comprehensive recovery policy is needed and with the helped promised by international community at Geneva, government has passed one hurdle but to make the sustainable recovery abundance of resources, capacity and transparency is needed.

The policy uncertainty has been a major cause in creating a mistrust among investors and has almost ceased foreign direct investment in Pakistan. This policy uncertainty is due to lack of will of national leaders to take tough decisions. For Example, former prime minister of Pakistan rolled out of International Monetary Fund’s (IMF) program fearing his ousting and to gain public support he reduced prices of commodities such as Petrol & Gas and took country almost on the verge of default.

The policy uncertainty is caused by Political uncertainty which in turn lead towards economic uncertainty. Economic stability can only be achieved by political stability and there’s no other way around. Political stability can be achieved through free and fair elections and elimination of the role of establishment in political process of Pakistan. And if a government takes long-term policy goals into account while formulating a policy rather than short-term goals to gain public support and trying to keep hold on the reins of Government. The selfish politicians have to play selfless and put Pakistan’s benefit before their own benefit to get Pakistan out of this political and economic turmoil.

The only solution in sight for Pakistan is to carry on with the 6$ billion IMF program and to try for rescheduling of depts repayment as it owes more than 70$ billion to be paid by the end of 2025 that is currently not possible. Another step from international community can also help Pakistan that is if a country makes an investment of 10-20$ billion directly rather than in the form of loans as happened in CPEC. Moreover, help from rich friendly Muslim countries can also provide an array of hope for Pakistan.

But these steps won’t address the clear underlying malaise of the economy and the fact that something fundamentally will need to change, in terms of how much the economy produces versus how much it spends, to avoid default down the road. But none of Pakistan’s political parties seem to have the political will or ability to bring about such change. Priorities needs to be shifted from personal interest of political elite to national interest. They must be ready to sacrifice their political image and interest for the greater good and to save the country from default down the road.

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