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It is more of the same.

Byline: M Ziauddin

The PTI-led coalition government blames the PMLN and the PPP, the parties that governed the country from 2008 to 2018 for the economic mess that the country is facing presently. The opposition PMLN and the PPP, on the other hand, blame the PTI which has been in the saddle since August 2018 for the current crisis that is besieging the country today. Both are right. But both are wrong as well. The fact of the matter is Pakistan, over the years has gradually turned itself into an aid dependent and overwhelmingly importing country requiring foreign exchange by the billions increasing further its dependence on donors as our own capacity to earn the needed FE has kept dwindling.

As a result, Pakistan has gradually lost its political and economic sovereignty to the donors very early in the day and therefore, was obliged to do their bidding even if it meant fighting wars on their behalf or doing something totally opposed to its own national interest. Our rulers since about 1958 did not let legitimate tax culture to develop in the country as they needed the political support of the landed aristocracy and big business created deliberately through the culture of licenses and permits. The none existence of tax culture in the country kept rendering the successive governments poorer while the private sector kept enriching its coffers by leaps and bounds. That is why the country has gone to the lender of last resort-the International Monetary Fund- for over 22 times, and for about 12 times since the 1990s.

Since the advent of the PTI government another IMF programme had looked inevitable. But since the party's leadership had fought the election on the promise of never going to the Fund for assistance, it took its time in deciding to take the necessary U-turn on the matter.The uncertainty is now over. At this very moment we are engaged in technical negotiations with the Fund for a programme worth $6-8 billion. This is, therefore, what is called the pre-negotiation stage when normally the two negotiating teams finalise their respective cases. In our case we have invariably entered this stage like a sacrificial lamb, prepared to sacrifice even our economic sovereignty in return for some quick balance -of- payment support, no matter what the attached conditionalities were. Hopefully, this time, it would not be a repeat of the past exercises, as the PTI-led coalition government has taken more than enough time making up its mind whether or not to go to the Fund. Still, one would like our negotiating team to give a last minute once over to its case in hand in its proper depth. It is in this context that one would like our negotiating team to take time out to do a close reading of a recently published technical paper on the subject. Since it is a technical work, it would be appropriate if the Planning Commission's technical manpower is given the task to go through the paper with fine toothcomb. One can get an idea about the thrust of the paper (The world system and hollowing out of state capacity: how structural adjustment programs affect bureaucratic quality in developing countries)from its abstract:Scrutinising policy reforms mandated by the International Monetary Fund (IMF), the authors argue that 'structural conditions' exert deleterious effects on bureaucratic quality by increasing the risk of bureaucrats falling prey to special interests and narrowing potential policy instruments available to them. In addition, companies in developing countries experience more bribery by public officials when they face more structural conditions under IMF programmes, says the study, which is based on data from 141 developing countries over a 30-year period.

The paper was co-authored by Dr. Bernhard Reinsberg of the University of Cambridge; Dr. Alexander Kentikelenis of Bocconi University; Dr. Thomas Stubbs of Royal Holloway, University of London; and Professor Lawrence King of the University of Massachusetts.

The study breaks down data into three-year periods between 1985 and 2014 to compare how bureaucratic quality evolves in the medium term in countries under an IMF programme under different conditionality profiles. The research uses the International Country Risk Guide to measure bureaucratic quality and the Business Environment and Enterprise Performance Surveys to assess bribery-related issues.

Bernhard Reinsberg's research broadly covers the political economy of international organisations - such as the World Bank and the International Monetary Fund - and seeks to contribute to a better understanding of what drives their behaviour and when their development interventions are effective. Within this framework, powerful inter-governmental organizations-like the European Union or the World Bank-are central actors that undergird and perpetuate the dependency of 'peripheral' nations (developing countries) on the capitalist 'core'. To do so, these organisations make their financial or technical support to developing countries conditional on the introduction of certain reforms that-explicitly or implicitly-favor the interests of the West and weaken bureaucratic quality.

IMF as an 'agent of neoliberalism' represents an international force that exerts direct policy pressure toward unleashing market forces in developing countries. The earliest studies in this tradition argued that the economic penetration of developing countries by advanced countries-in the form of exploitative trade and investments in natural resources-stunted economic development in the former through transfers in surplus to the latter. Indeed, since potentially taxable surpluses shifted to advanced nations through exploitative relationships, peripheral states were consigned to perennially limited public revenues to invest in building up capable bureaucracies. In this context, donor states provide aid to increase the likelihood that governments of the periphery will tolerate the continuation of outflows of private profits and interest on past debts.

Such aid may support governments by providing a short-term solution to economic difficulties, but in the long term it perpetuates dependence on continued foreign aid flows. Countries with greater foreign aid revenue are less reliant on tax revenues drawn from citizens and thus face less domestic pressure to maintain popular legitimacy through investment in effective public institutions.

More recent perspectives document how international financial institutions (IFIs)-the IMF, the World Bank, and regional development banks-deepen core-periphery dependency relations. These studies posit that IFIs inhibit economic development by siphoning surplus from developing countries in the form of debt and interest payments on loans. Further, the practice of conditionality gives creditors-the high-income countries controlling IFI operations-unparalleled leverage to alter the political economies of borrowing countries in the interests of the West. Most conspicuously, Western business and financial interests have benefited from securing contracts and expanding their access to developing countries implementing structural adjustment programs. This evidence is in line with the expectations of world systems theory: the conditionalities of the IMF and development banks entrench developing countries within the periphery.
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Publication:Pakistan Observer (Islamabad, Pakistan)
Date:May 6, 2019
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