Would the IMF ever cut off Pakistan?
From Pakistan’s Express Tribune, an update on the difficult talks between the International Monetary Fund and the Pakistani authorities: The International Monetary Fund on Monday seemed reluctant to endorse the government’s view that Pakistan’s economy was on track, heightening Islamabad’s financial woes since reticence on the part of the IMF is likely to keep away ...
From Pakistan's Express Tribune, an update on the difficult talks between the International Monetary Fund and the Pakistani authorities:
From Pakistan’s Express Tribune, an update on the difficult talks between the International Monetary Fund and the Pakistani authorities:
The International Monetary Fund on Monday seemed reluctant to endorse the government’s view that Pakistan’s economy was on track, heightening Islamabad’s financial woes since reticence on the part of the IMF is likely to keep away other donors.
A finance ministry official told The Express Tribune that during first day of policy level talks between the IMF and Pakistan, the Fund was not inclined in issuing a Letter of Comfort – a policy statement endorsing the view that the country’s economic fundamentals were on right track. If the Fund issues the LOC, it will open a window for Islamabad to obtain loans from the World Bank and the Asian Development Bank (ADB) for financing the budget deficit.
Who has the leverage in this kind of situation? At first glance, the IMF would seem to have all the cards: It’s got the funds that Pakistan needs. But for all the tough signals the fund is sending, Pakistan really has the trump: the possibility of its own implosion. The IMF team is therefore walking a thin line in these negotiations. They want to extract the maximum reform possible, but they must also know that the fund’s key shareholders — and the United States, in particular — won’t consent to anything that might further destabilize the country. Some important research on the question of IMF conditionality, by Randall Stone in particular, demonstrates that there are really two standards for enforcing IMF conditions: one for countries that are strategically important and one for those deemed less important. The former group gets plenty of extra leeway. Don’t expect the IMF to pull the plug on Pakistan anytime soon.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
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