Egging on the IMF

Is populist leader Imran Khan’s recent letter to the IMF a malicious ploy to push a cash-starved Pakistan on the brink of default? Or is it an earnest attempt to safeguard genuine democracy in Pakistan? Khan’s detractors and supporters will answer the questions in their own fashion.

Likewise, the question of whether the correspondence on hand will serve any, and what, purpose is susceptible to varying answers. Be that as it may, the PTI supremo is not the first political leader in Pakistan who has invited international intervention in the country’s domestic affairs.

Written in the backdrop of the recent national elections, which the PTI alleges were rigged – though the party ended up winning more seats than most forecasts had given it – the letter is addressed to the IMF managing director ‘under the instructions and on behalf of’ the jailed leader. The letter is carefully worded to avoid the impression that the PTI is out to scuttle the multilateral donor’s lending to Pakistan, which it desperately needs to avoid a complete economic meltdown, leading possibly to it having to default on its external debt obligations.

All the same, the letter adds that the lending facility may only be negotiated by a ‘duly elected government’, which, in the party’s eye, the new coalition doesn’t represent. Therefore, the Fund has been requested to make the capital inflows to Pakistan subject to audit of at least 30 per cent of the total number of seats of the national and provincial assemblies.

In Pakistan, almost every electoral exercise has remained shrouded in controversies, with the losing party (or parties) crying foul. In 2018 when the PTI was elected to power, the PML-N and other parties had cast similar doubts on the fairness of the elections.

It may be strange, but by no means unprecedented, that the party winning the highest number of seats is putting the credibility of the polls under question. In 1988, the PPP, which emerged as the single largest party and eventually formed the government, declared the elections rigged. In 2024, however, the PTI has to sit in the opposition because of its failure or unwillingness to negotiate a coalition with another major party.

In recent years, the political and economic cycles have converged, as the induction of a new government coincides with the start of a fresh IMF programme. In 2008, the PPP government signed a credit agreement with the Fund a few months after its inauguration. The PML-N government did the same in 2013. In 2018, the PTI government flip-flopped for several months on the question of going to the multilateral donor, believing that they would be able to recover the mythical $200 billion stashed by ‘corrupt’ Pakistanis in foreign banks. Once the dichotomy of myth and reality dawned upon it, the ruling party wasted little time in approaching the Fund.

On none of the occasions in the past did a political party send a formal request to the lender of last resort to make its assistance contingent upon an election audit. This makes the PTI’s letter at issue an unprecedented move. If nothing else, it brings out the PTI’s unique style of doing politics. In 2014, it may be recalled, the party while protesting the ‘rigged’ elections had urged the people to stop paying taxes and utility bills and overseas Pakistanis not to send remittances.

The number of resident or expatriate Pakistanis who heeded the exhortation is beside the point. What’s unfortunate is that a political entity came up with such an unlawful demand and, what’s even more unfortunate, that it got away with that. In any other democracy, such advice to the people would have sounded the death knell of a leader’s career. But in our case, it shored up his stature for being brave enough to mince no words in calling a spade a spade. At any rate, if people do not pay taxes or utility charges, it’s they who will suffer the most. Anyone who advises a parent to throw the baby out with the bathwater is not very sincere with the family.

At the same time, other political parties and leaders – both past and present – have also looked to friendly and influential countries to meddle on their behalf on the strength of strong personal relations or their common stakes in democracy. As a rule, such interventions are sought behind the scenes or in a subtle manner. Therefore, it may not be in order to name the beneficiaries or the countries concerned.

Whether those interventions served the cause of democracy or otherwise benefited the nation is anybody’s guess. But each intervention has lent credence to the impression that by withholding or unleashing economic benefits – or even giving signals to that effect – the state of Pakistan can be made to be more receptive to foreign demands.

It seems the PTI had that impression in mind when it decided to approach the IMF for an election audit. Aside from responding to the requests for intervention on a case-to-case basis, most developed countries have put in place an institutional mechanism to meddle in the internal affairs of developing countries. An example is the Special Incentive Arrangement for Sustainable Development and Good Governance, commonly known as GSP Plus, of the European Union (EU), which gives duty-free access to developing countries like Pakistan to all EU member states.

To become a recipient of GSP Plus, a country must ratify and ‘effectively’ implement several multilateral conventions relating to human rights and good governance, such as the International Covenant on Civil and Political Rights.

The EU is entitled to monitor the implementation of these conventions and take up with the recipient the deficiencies, if any. A country may be removed from GSP Plus if it fails to measure up to the stipulated standards.

At any rate, the scope of these conventions is broad enough to give EU members a wide window into the political affairs of countries like Pakistan. Whether the EU or any of its constituents has engaged with Islamabad on recent political developments using GSP Plus as a bargaining chip is a different question.

Coming back to the IMF, its credit remains subject to a set of rather stringent conditions, which in principle are essentially economic. That said, the line between economics and politics is only fine, as political policies and developments bear significantly on the economy.

In a narrow sense, it is the Fund’s business to make sure that the government concerned is capable of meeting the performance requirements that the capital assistance entails. It is from this business that the IMF’s interest – the wherewithal it possesses – in a recipient country’s politics stems. This especially holds in the case of countries like present-day Pakistan, beset with intense political polarization.

We may also be mindful that though a global institution, the Fund’s architecture rests on the West’s economic values, which are rooted in certain political norms – both summarized in the term ‘liberalism,’ at the heart of which lies democracy. Besides, the US, the paterfamilias of liberalism, accounts for 16.5 per cent of the total votes in the IMF Executive Board, much higher than any other country, which in the end decides which member will get the Fund’s capital and on which conditions.

What importance the IMF attaches to the PTI’s letter in drawing up its credit programme with Pakistan is a question that cannot be answered here. However, the party’s election audit demand may further downgrade Islamabad’s negotiating power viz-a-viz the Fund and make for more stringent – and manifestly unpopular – conditions. Maybe the letter was undergirded by such a perception.

The writer is an Islamabad-based columnist. He tweets/posts @hussainhzaidi and can be reached at: hussainhzaidi@gmail.com