As the IMF bails out Pakistan yet again, accountability is the casualty
On May 9, in a tense session marked by geopolitical friction, the International Monetary Fund approved Pakistan's 24th bailout: a $1 billion disbursement under the Extended Fund Facility and $1.3 billion from the Resilience and Sustainability Facility. India abstained in protest, citing Pakistan's role and responsibility in the April 22 Pahalgam terrorist attack that killed 26 people, warning that the IMF loan might be indirectly misused for state-sponsored terror. Despite India's concerns, the Fund pushed forward with the appropriation, prioritising regional stability over New Delhi's objections. The moment marks a continuation of Pakistan's long, tangled waltz with debt and the role of international financial institutions in supporting it.
Since 1958, Pakistan has secured over $28 billion in IMF arrangements. One needs to perhaps picture the neighbouring economy — like many failed states surviving on foreign aid or development assistance — as a gambler at a table where each bailout is a borrowed chip to cover the last round of losses. Even now, the IMF hesitates to declare Pakistan's debt unsustainable, fearing that doing so will scare off other lenders. It's what former State Bank of Pakistan governor Murtaza Syed calls 'extend and pretend'. The cost of this strategy is borne not in Washington, but in Karachi, Lahore, and Quetta.
Pakistan spends around 65 per cent of its tax revenue on interest payments, which leaves little for its own people. Education receives just 1.7 per cent, and health only 0.8 per cent. The Human Development Index of Pakistan lags at around 0.540, trailing behind Bangladesh. The literacy rate is at 60 per cent, and child mortality hovers at a staggering 67 per 1,000 births. For all its loans targeting the development of schools and hospitals, World Bank audits reveal up to 40 per cent of funds are lost to delays or corruption. Where does the money go?
Craig Burnside and David Dollar, in a paper titled 'Aid, Policies and Growth', studied the relationship between aid in all its forms (the term often used for development assistance) and growth for developing nations. The impact of any development assistance, the authors find, closely depends on the state's institutions and policies. In countries where corruption and institutional failures are commonplace, most aid or development assistance is wasted. It also indicated the hegemonic influence of the US (through bilateral and multilateral assertion) in ensuring aid for strategic reasons, often in the name of providing developmental funds.
In the shadow of Pakistan's $131 billion debt mountain, a stark choice looms larger with every loan that it receives: Spend the money on guns or growth. The IMF's latest bailout is meant to provide fiscal oxygen for growth. With reserves falling below $4 billion, enough for just a few weeks of imports, the infusion offers momentary relief. But growth is conditional on the robust presence and action of 'good' institutions, which the Pakistani nation-state has lacked due to a decades-old internal conflict between the army and the elected state. This makes any transparent, objective function of the state difficult.
According to the Pakistan Economic Survey 2023–24, the defence allocation for FY2024–25 is Rs 2,122 billion, which constitutes 1.7 per cent of the country's GDP. This represents a decrease from 2020's defence spending of 2.6 per cent of GDP.
A 2024 report by the Human Rights Watch highlighted that Pakistan paid about seven times more per person to service its external public debts than it did on healthcare in 2021. Entities like the Fauji Foundation, Army Welfare Trust, and Shaheen Foundation run everything from fertiliser plants to insurance companies, often outside the purview of civilian audits. In 2023, the military formalised its economic power with the Special Investment Facilitation Council (SIFC), chaired by Army Chief General Asim Munir. Meant to attract foreign investment, the SIFC brought in just $1.9 billion in FDI in FY24, a figure dwarfed by India's $70.9 billion haul.
Critics argue that the IMF and World Bank are complicit, not through intent, but through indifference. Loan conditions typically target fuel subsidies, civil service pensions, or tax reforms that affect the public. But social sector budgets remain stagnant, and the military remains untouched. Its budget is sacrosanct, and its political power is unchallenged. The ousting of Imran Khan and the post-election manoeuvrings of 2024 have only reinforced the army's grip on civilian institutions.
India's abstention on May 9, by challenging the $1.3 billion Resilience and Sustainability Facility, voiced a growing unease over the international community's continued funding of a regime where strategic priorities overshadow systemic reform.
This is a test for the IMF and its peers, which are caught between stabilising a geopolitical linchpin and enabling a cycle of dysfunction. India's protest, sparked by the Pahalgam terror attack and subsequent developments, flagged a deeper issue: The IMF's cheques often bypass accountability. The Fund's 2024 reports hint at 'geopolitical considerations' trumping fiscal rigour, a nod to Pakistan's role as a buffer for other geopolitical interests. If austerity sparks unrest, then the world need only look at Kenya's 2024 riots, where IMF-backed reforms triggered violent protests and eroded public trust.
The Fund's credibility hangs in the balance. It is increasingly seen as a lender propping up regimes that suppress dissent rather than deliver reform. The World Bank faces similar questions, as its governance and development projects stall in countries where entrenched elites prize control over change.
For global powers, the implications are not just economic but strategic as well. India's rare protest signals a turning point: The international financial system can no longer afford to bankroll dysfunction in the name of stability. As the IMF prepares its next disbursement, the real test lies in not ignoring the cost of misgovernance.
The writer is Professor of Economics and Dean, IDEAS, Office of InterDisciplinary Studies, Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities. Ankur Singh contributed to this article
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
News18
7 hours ago
- News18
Trump's 'Great Depression' Threat: Here's What Happened In 1929
According to WTO and IMF, the US average tariff rate rose from 2.4% at Trump's start to 20.1%, peaking at 24.8% after May's China tariff hike, the highest since 1904 US President Donald Trump has once again shocked the world, this time issuing a direct threat to the US judiciary and the global trade system. Trump has stated that if the court rules against his tariff policy, America will fall into another 'Great Depression' akin to the one in 1929. Trump asserts that his tariffs have strengthened the US economy, and a court rejection would disrupt the country's economic balance. He has labelled it the beginning of a 'Great Depression like 1929'. To understand why Trump's statement is considered dangerous, it's crucial to examine the impact of tariffs on the US market and recall the Great Depression of 1929. Trump Warns Of Crisis If Court Removes Tariff Trump wrote on the social media platform 'Truth Social' that if a 'radical left court' decides to remove the tariffs, America will never recover economically. He stated, 'If this happens, it will be a Great Depression like 1929. Destruction is certain. We will never be able to bring back our wealth, power, and respect." He sarcastically added that the court should have made a decision against the tariffs at the beginning of the case. Now, with the country at the peak of economic achievement, such a decision would be dangerous. Trump's Take: Tariffs Are Beneficial Trump argues that the tariffs have benefited the American economy, with billions of dollars flowing into the US treasury and a positive effect on the stock market. He called it the 'era of greatest wealth and power' for America. However, his policies have also been criticised. Many economists argue that tariffs have increased the burden on consumers and fuelled inflation. Highest Tariff Rate Since 1910 According to the WTO and IMF, the average tariff rate in the US has reached 20.1%, the highest since the 1910s. At the beginning of Trump's tenure, this rate was only 2.4%. After increasing tariffs on China in May this year, the rate surged to 24.8%, a record since 1904. Currently, the tariff war between America and China is on a temporary pause, but this truce is ending next week. What Was The 1929 Great Depression? The Great Depression of 1929 was marked by a massive stock market crash in America that devastated the global economy for years. Unemployment soared, banks and companies went bankrupt in large numbers, and there was widespread economic stagnation. Trump's warning alludes to this history, suggesting that if the court overturns the tariffs, America could face a similar economic catastrophe. tags : China Tariffs Depression donald trump economic crisis United states US court view comments Location : United States of America (USA) First Published: August 11, 2025, 17:53 IST News world Trump's 'Great Depression' Threat: Here's What Happened In 1929 Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
&w=3840&q=100)
First Post
9 hours ago
- First Post
A question for Munir: Why India became ‘Mercedes' and Pakistan a ‘dump truck'?
Asim Munir's 'Mercedes vs dump truck' analogy was meant to show Pakistan's grit, but in the cold light of economic history, it only revealed just how far the country has stalled while India races ahead read more Wish Pakistan Army's Field Marshal Asim Munir could pull off something like Winston Smith in George Orwell's classic 1984. In Orwell's novel, Smith works at the Ministry of Truth (Minitrue in Newspeak), where his job is to alter historical records and documents so they match the current version of events approved by the Party. He rewrites old newspapers, speeches and reports so that past predictions and statements always appear correct, making it seem like the Party is infallible — a kind of professional reality-revisionist. It's a bit like being a historian, except your main qualification is pretending the past never happened the way you remember it. STORY CONTINUES BELOW THIS AD Munir, a devout Muslim and apparently part-time automotive philosopher, presents himself as an ambassador of truth. In his own world, Munir told a gathering in Tampa, Florida, this week that India was 'a shining Mercedes' while Pakistan was 'a dump truck full of gravel'. Forgive him for thinking Mercedes and Ferrari are one and the same thing. His point, as he explained, was that if this lumbering dump truck rammed the Mercedes, the Mercedes would lose. It's a neat analogy, except that a dump truck is always a dump truck, and a shining Mercedes is always a shining Mercedes. The analogy itself says a lot about the state of progresses made by the two countries that attained Independence on the same night in August 1947. The internet, as expected, did not buy the ticket to this logic ride. Twitter (or X) users quickly noted that Pakistan's dump truck might not even start, or worse, topple over before ever reaching the Mercedes. Some suggested the dump truck was already in the scrapyard, stripped for parts and mortgaged to the IMF, the International Monetary Fund. One user quipped, 'Inka field marshal analogy me bhi apne desh ki beizzati karwa raha hai [even in analogies, Munir manages to humiliate his own country]. And yet, the analogy was honest. Pakistan is economically the dump truck, but not the sturdy, rumbling kind you see at a construction site. This is more like a battered, smoke-belching 1970s relic, bought on credit, with no fuel, and whose driver is constantly in court for loan defaults. From agrarian beginnings to IMF regular When Pakistan was born in 1947, its GDP was dominated by agriculture (53.2 per cent), and a desperate need to industrialise — much like India. Both countries needed industrialisation and shift in economic structure. Pakistan got fertile lands and minerals, with good sea port, and comparatively low population load. By the early 1950s, the two newly independent countries backed five-year plans to guide their path to economic progress. Yet, 78 years later as the two nations gear up to celebrate their respective Independence Days, the most powerful man in Pakistan thinks his country is a 'dump truck' to the 'shining Mercedes' that he described India as. STORY CONTINUES BELOW THIS AD India's growth story is well-documented and debated across organisations and universities. But how did Pakistan became a 'dump truck'? The first few years after Independence, 1947–1950, saw Pakistan's GDP growth limp along at barely over 3 per cent. By the 1950s, the country embraced planning with five-year plans, import regulation and modest growth — manufacturing at 7.7 per cent and agriculture at 1.9 per cent. By the 1960s, under General Ayub Khan, the economy showed some promise — GDP growth of 6.7 per cent, manufacturing booming at 8.51 per cent. But then came the wars, floods and the spectacular self goal of losing East Pakistan in 1971. The dump truck's first major crash. In the 1970s, the socialist experiments of Zulfikar Ali Bhutto nationalised industries — a sort of emulation of India's model — sent GDP growth into a pothole: agriculture grew at just 2.7 per cent, inflation soared to 15 per cent and the deficit ballooned to 8 per cent of GDP. The Mercedes next door, meanwhile, was busy sowing the seeds of its Green Revolution, which would propel it toward self-sufficiency in food production. STORY CONTINUES BELOW THIS AD Golden illusion of the 1980s General Zia-ul-Haq's era (1977–1988) saw an economic uptick. GDP grew at 6.3 per cent, helped by US aid during the Afghan war, remittances and reversal of nationalisation. The dump truck got a new coat of paint and a temporary infusion of diesel—courtesy of Washington. But it was all external money. When the Soviet-Afghan war ended, the aid dried up. Pakistan returned to its default setting of political instability, sanctions and IMF begging bowls. The 1990s under alternating PPP and PML-N governments were a fiscal freefall—GDP growth at just 4.05 per cent, foreign debt tripled, and the country flirted with bankruptcy after nuclear tests in 1998. India, during the same decade, liberalised its economy in 1991, opening the floodgates to investment, technology and global trade. By the time Pakistan was negotiating its nth IMF tranche, India's GDP growth was comfortably cruising at 6 per cent annually. The Musharraf mirage Enter General Pervez Musharraf in 1999 — the other 'golden era' military ruler economists grudgingly acknowledge. Growth peaked at 8.6 per cent in 2004–05, foreign reserves swelled to $9 billion and debt-to-GDP dropped from 100 per cent to 55 per cent. For a fleeting moment, the dump truck almost resembled a serviceable pickup. But the model was fragile which was consumption-driven, import-heavy and utterly dependent on post-9/11 US aid. When that pipeline slowed, so did the economy. By Musharraf's exit, Pakistan was again struggling to finance even its basic fuel imports. Decade of decay (2008–2018) PPP rule after 2008 brought growth down to an average of 4 per cent, agriculture to 2 per cent. Power shortages crippled industries, inflation soared and debt piled on. The PML-N (2013–2018) managed some stability — GDP growth back to 5 per cent, inflation easing — but only by borrowing heavily from the IMF. In contrast, India during this same period emerged as the fastest-growing major economy, riding the tech boom, manufacturing incentives and infrastructure buildouts. By 2018, India's nominal GDP was over $2.7 trillion while Pakistan's was around $314 billion. STORY CONTINUES BELOW THIS AD Khan catastrophe and Covid collapse Imran Khan promised a 'Naya Pakistan' in 2018, but GDP growth crashed from 5.55 per cent in 2017 to just 0.99 per cent in 2019. Debt ballooned by $70 billion in three years and Covid-19 in 2020 shrank the economy by 6.4 per cent, wiping out millions of jobs. India, too, faced a Covid recession, but by 2022 was already back in high-growth mode, aided by digital adoption and strong exports. Pakistan, meanwhile, was queuing outside the IMF office like a regular at a tea stall. The 2023–2024 currency of crisis By 2023, Pakistan's GDP had fallen to $338.4 billion, inflation hit over 29 per cent and foreign exchange reserves hovered near default territory. Debt servicing consumed nearly half the federal budget, with $23 billion due in external repayments for FY2025–26. The Shehbaz Sharif government's $7 billion IMF bailout in late 2024 was a lifeline—but with austerity conditions that would choke growth. Inflation, however, dropped from 29 per cent to around 4.6 per cent in 2024 and reserves improved to $9.4 billion, but these are band-aid metrics. The fundamentals—low productivity, narrow export base and chronic political instability — remain untouched. India's Mercedes moment While Pakistan tries to keep the dump truck from rolling backward, India has officially overtaken Japan as the world's fourth-largest economy in 2025, with GDP at $4.187 trillion. This is not just size — it's trajectory. India is targeting over 7 per cent growth, driven by manufacturing, services, infrastructure and digitalisation. Initiatives like Make in India, the PLI schemes and massive infrastructure spending have turned India into a magnet for global investment. It has weathered demonetisation, a pandemic and global recessions — and still emerged stronger. Pakistan, in comparison, has averaged around 4 per cent GDP growth over the past two decades, punctuated by repeated IMF rescues. The gap between the Mercedes and the dump truck isn't just cosmetic — it's structural, systemic and widening. STORY CONTINUES BELOW THIS AD Why the dump truck analogy backfires Munir's boast that a dump truck can wreck a Mercedes ignores the basic principle of economics — and physics. The Mercedes is faster, more efficient and designed for long-term performance. The dump truck is slow, inefficient, and, in Pakistan's case, running on loans and donor goodwill. If the dump truck 'hits' the Mercedes — be it via war, sanctions or regional instability — it's Pakistan that risks total economic collapse. With imports covering basics like wheat and fuel, and foreign reserves covering barely two months of imports, Pakistan cannot sustain prolonged confrontation. Meanwhile, India, with diversified trade partners, a over $600 billion forex reserve and global investor confidence, would take a hit but recover. The dump truck, however, would be towed straight to the IMF workshop — for its 24th visit since 1958. Ironically, Munir's latest anti-India outbursts followed India publicly stating that it shot down at least five of Pakistan's fighter jets and also damaged F-16s in hangar during Operation Sindoor. Social media is abuzz reminding Munir of what a 'Mercedes' just did to the 'dump truck'. Munir is about loud speeches, empty wisdom The deeper irony is that the Pakistan military has been one of the biggest players in Pakistan's economic mismanagement and the primary beneficiary of Pakistan's budget revenues. The army controls vast business conglomerates in real estate, energy, agriculture and manufacturing. So, when Munir compares Pakistan to a dump truck, he might be advised to check who's been driving it for most of the past 75 years. Spoiler: it's been men in uniform. STORY CONTINUES BELOW THIS AD Upgrade or obsolescence? Pakistan's economic journey since 1947 is a story of missed opportunities, political instability and over-reliance on foreign aid. Even its best growth periods — Ayub in the '60s, Zia in the '80s, Musharraf in the 2000s — were built on temporary external inflows rather than sustainable reforms. India's rise to a $4.1 trillion economy is not just the result of size or luck. It's the cumulative effect of decades of policy shifts, institution building and integration into the global economy. The Mercedes keeps upgrading. The dump truck, meanwhile, is still waiting for the next donor to fill the tank.
Hindustan Times
a day ago
- Hindustan Times
How India should engage with global indices
One of the key contributions of NITI Aayog has been the development of a range of performance indices — covering innovation, water management, fiscal health, poverty and others — that facilitate cross-state comparisons. These tools have spurred healthy competition among states and helped shape policies, direct investments, and target development assistance. They've also supported greater transparency and accountability in governance. Villagers discuss air pollution in their village in Hasaka countryside, Syria, July 20, 2025. REUTERS/Orhan Qereman(REUTERS) On the global stage, several international indices — including the Human Development Index (HDI), Social Progress Index (SPI), Global Nutrition Report, World Governance Indicators (WGI), and Corruption Perceptions Index (CPI) — serve a similar purpose. When grounded in objective, measurable data, such indices offer valuable insights. However, when they rely on subjective assessments or perceptions, they risk becoming biased or agenda-driven, and countries in the Global South are often at the receiving end. Over the past decade, India has witnessed a decline in several international rankings, particularly in perception-based indices related to democracy, press freedom, and civil liberties. In early 2021 the government formed a committee of secretaries to monitor and review the measures taken across ministries at improving India's performance on key global benchmarks. In November 2022, Economic Advisory Council to the Prime Minister (EAC-PM) released a report examining the reasons behind India's low rankings in three opinion-based indices: Freedom in the World, the EIU Democracy Index, and the Varieties of Democracy project. By April 2025, media reports indicated that the government was reviewing the methodologies of 28 global indices — including those assessing democracy and hunger — over concerns about flawed assessments. Particular attention was being paid to sample sizes and modelling techniques used for cross-country comparisons. A recurring issue in these indices is their reliance on the opinions of a small group of unnamed experts. For example, the Democracy Index has ranked India at 104, while other countries with questionable recent democratic records have fared significantly better — raising questions about the consistency and contextual understanding of these rankings. Similarly, India was once ranked below Afghanistan in the Press Freedom Index — a finding that many critics viewed as absurd, given the ground realities in both nations. Example of another questionable parameter used by some indices is the extent of direct popular voting. Since India does not have referendums or plebiscites — a feature more common in smaller nations- it receives a low score. Applying such metrics uniformly across vastly different political systems can lead to misleading conclusions, especially when countries like Belarus or Afghanistan appear more democratic on certain isolated parameters than India or the US. In a related development, a Reuters article recently questioned the credibility of India's official unemployment data, citing a perception-based survey of around 50 anonymous economists. The government's pushback focused on the lack of methodological transparency and the potential for bias in interpreting complex economic data through limited, subjective input. While it's tempting to dismiss these rankings as niche academic exercises, their real-world implications are significant. Perception-based indices feed into broader tools like the World Governance Indicators (WGI), which, in turn, influence sovereign credit ratings. Moreover, with Environmental, Social, and Governance (ESG) metrics gaining traction in global finance and Artificial Intelligence (AI) systems increasingly trained on these datasets, uncritical adoption of flawed indices could entrench systemic biases. Looking ahead, it is vital for the government to actively engage with institutions that compile global indices and demand the updation of their processes and contextualisation of the parameters. For example, India could encourage the World Bank to demand greater transparency and accountability from think tanks contributing to the WGI. Constructive dialogue — rather than outright dismissal — is key to ensuring fairer evaluations. At the same time, public and private institutions in India — including think tanks and academic bodies — must play a more proactive role. They should develop their own metrics, deepen regional research collaborations, and present alternative frameworks grounded in local realities. A recent milestone in this direction was the October 2024 launch of sovereign credit ratings by CareEdge Global, the first Indian agency to assess global economies. This initiative is a welcome step toward enhancing transparency and offering diverse perspectives in global assessments. Ultimately, shaping global narratives requires more than critique — it calls for credible alternatives. Both the government and civil society must invest in building India's intellectual and analytical capacity to ensure that our story is told with accuracy, fairness, and nuance. The article is authored by Priyal Bhardwaj, founder, Sangini Saheli and general secretary, women's wing, BJP, New Delhi.
