Book & Author
Dr Shahida Wizarat: Alternative to the IMF — And Other out of the Box Solutions
By Dr Ahmed S. Khan
Chicago, IL
After WWII many developing countries got independence from colonial powers and their people aspired to excel economically. But progress in many developing countries has been inhibited due to a number of extrinsic and intrinsic factors.
Extrinsic factors include political and economic instability caused by international financial institutions, and economic exploitation of resources by multinational corporations. Intrinsic factors are illiteracy, poverty, social injustice, lack of resources and intellectual capital, population pressures, brain drain, and corrupt-to-the-core power-hungry ruling elite — generals, politicians, judges, journalists, tycoons, and feudal lords.
During the past six decades developing countries have faced unprecedented economic challenges and crises, and to prevent adverse economic consequences they have sought assistance from the International Monetary Fund (IMF). But the IMF has been criticized by many experts for its failed economic policies implemented in the developing world. Denouncing the IMF policies Nobel laureate (2001, Economics) Joseph Stiglitz states in his book Globalization and Its Discontents that many of the economic reforms required for its lending — fiscal austerity, high interest rates, trade liberalization, privatization, and open capital markets — have been counterproductive for target economies and have caused devastation for local populations.
In response to Stiglitz’s critique, Thomas Dawson, Director, External Relations IMF (2002), has observed: “Stiglitz's characterization of a greater push toward capital account liberalization is broadly correct, it is inaccurate in many important details. The IMF and the US Treasury did not encourage countries to liberalize short-term flows through the banking sector…”
William Easterly in his book The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, also observes that many of IMF’s interventions — demanding structural adjustments in developing countries in Africa and Latin America — have been overly ambitious and intrusive, and notes that the strict loan conditions and technical advice are not in sync with ground realities.
Recently, IMF’s work in more developed economies has also come under criticism. Larry Elliot, The Guardian’s economics editor, in 2016 has observed: “The IMF’s remedy for Greece and Portugal during the Eurozone crisis has been straight out of the structural adjustment playbook: reduce public spending, cut salaries and benefits, insist that state-owned enterprises return to the private sector, reduce minimum wages, and restrict collective bargaining.”
In Alternative to the IMF — And Other out of the Box Solutions, Professor Dr Shahida Wizarat has juxtaposed Pakistan’s economic and financial crisis with the country's 75 years history of poor governance and myopic leadership. The author reveals that excessive borrowing from the IMF with strict conditionalities — through the 1980s to present — has caused decline in the growth of output, investment and employment, creating imbalances in income distribution, increasing poverty, with very adverse impact on the socio-political fabric of Pakistan.
The author also sheds light on how state power is being used to demolish the state to keep it as a colony as it existed prior to WWII. The author presents viable alternatives to IMF programs and other out of the box solutions to excel in agriculture, industry, balance of payments, public finance, natural resources, political economy, education, governance, privatization and liberalization problems affecting Pakistan. The author believes that the strategies formulated by her for Pakistan can also be applied to other developing countries in Asia, Africa, and Latin America.
Professor Dr Shahida Wizarat serves as Dean of the College of Economics and Social Development (CESD) at the Institute of Business Management (IOBM). She received her master’s from Vanderbilt University, USA, and her PhD in Economics from the University of East Anglia, England. Her research interests are in areas of industrial productivity, profitability, concentration, economic policies, international financial institutions, debt management, privatization and liberalization, food security, conflict and growth, natural resources, and political economy. Dr Wizarat has authored numerous research articles and three books: The Rise and Fall of Industrial Productivity in Pakistan, Fighting Dependence: Proclaiming Sovereignty for an Enslaved Pakistan, and Fighting Imperialism: Liberating Pakistan.
The book has 67 chapters — mostly based on her previous writings — covering a wide spectrum of topics: Failure of Another IMF Program: Making A Better Alternative Available, Making the SBP Autonomous, The Real Beneficiaries of Pakistan's Policies, Use the State to Demolish the State, Pakistan's Politico-Social Chaos, Governance and Institutional Decay, Aliens Rule Pakistan, Slaves of the Empire, Loot and Plunder of Pakistan's Natural Resources, The New World Order and Pakistan, An Open Letter to the IMF, Checking the Credentials of Pakistani Leadership, An Agenda to Save Pakistan, Meeting Food Security: GM or Organic Way?, Food Security Through GMOs?, Give Me Back My Pakistan!, Disconnect between Government & Strategic Interests, Privatization of Pakistan's Strategic Assets, Education Sector Overhaul in Pakistan, A Sustainable Development Strategy for Pakistan Chapter, Reconciling the Trade-off between Strategic & Economic Interests, Challenges Emanating from Present Economic Situation, Pakistan's Posture at the FATF, Why Kashmir Does Not Interest the Rich & the Powerful, Growth of the Chinese Economy, Attack on Pakistan: Real Threats or Mere Rhetoric? Pakistan's Economic Managers & the IMF, Corona Virus Pandemic, Voodoo Economics, Asia Pacific or 'Indo-Pacific'? and many other topics.
The author observes that until 1980s Pakistan remained a prosperous country with a growth rate of more than 6%; then in 1990s with the return of PPP and PML-N governments due to poor governance, mega corruption and lack of visionary leadership, the growth rate plunged, poverty doubled, and the country’s UNDP human development index dropped to lowest levels. The author attributes Pakistan’s economic crisis to excessive borrowing from the IMF. She also states that the country's policies and governments are still made abroad — nothing has changed since 1947 when Pakistan gained independence. The author believes that her alternative model — in contrast to the IMF model — can bring prosperity back to Pakistan.
Expounding on her economic model in the preface, the author states: “Often times I had been asked whether an alternative to the IMF exists. I not only formulated an alternative 22 years back but have perfected it with recent data and innovative ideas. Although my alternative is superior to the IMF strategy, there is no appetite for an out of the box solution in the Government of Pakistan. There doesn't seem to be much interest in a better strategy, as successive Pakistani governments prefer one that has IMF’s s blessings and US stamp of approval! My balance of payment crisis management …entails the use of barter trade and payment in local currencies, instead of foreign currencies. I have also proposed banning luxury and food products like chocolates, cheese, beverages, fruits, etc., since they are not essential imports. In spite of the seriousness of the crisis, no attempt has been made to crisis manage the balance of payments by successive Pakistani governments. The following are important deviations in my strategy from the IMF model: (a)The strategy formulated by me ensures that we tap revenue from all the sources and not just export earnings. (b) The adjustment I am proposing is not recessionary but expansionary, (c) The cost of adjustment is passed from the poor to the wealthy classes.”
Commenting on the post 9/11 world, the author observes: “Post 9/11 the world is being taken to the colonial world order which was abandoned post World War II. The leap from the present neo-colonial world order to the colonial world order of the pre-World War II era envisages dismantling the state in Third World countries through ‘use of the state to demolish the state.’ State power is being demolished as a result of connivance between rich Western countries and partners in the Third World. These objectives are very easy to achieve in a country like Pakistan, where governments are installed by the USA and UK and corruption and dishonesty are rampant. Pakistan is a predatory state where the vast majority of office holders use their power for personal benefits and couldn't care less about national interest…”
Reflecting on the strategy used by the external forces, and lack of national spirit in leaders, the author notes, “The methodology entails acquiring control over the tangible and intangible elements of national power by outside forces. One factor that will have a bearing on several elements of national power [is] finances. Through acquiring control over finances, outside forces can control natural resources, quality of population, economic development, technology and military preparedness. The SBP Autonomy Act is an attempt to 'use the state to demolish the state’ through acquiring control of Pakistan's financial sector directly by the US…The entire geo-strategic agenda of the US can be gauged from the proposed Act. The proposed SBP Act is not making the SB autonomous, but the Governor SBP very powerful and bringing the SBP under the control of the IMF, US and presently India as well. If the SBP Amendment Act was about making the SBP autonomous, then the SBP board and the committees should have been strengthened. But quite the reverse has happened, as some of these bodies have been abolished and their powers passed on to the Governor. This reflected through bestowing tremendous powers, paying a fantastic package and making the Governor SBP unaccountable and authorized to receive and pass on Pakistan's confidential information also reveals that public office holders who are enjoying filthy rich lifestyle at Pakistan's expense have failed to protect Pakistan's sovereignty if their appointments and extensions are made by the US and UK. This corroborates my point made several times earlier that the biggest security threat to Pakistan is its political order. The security threat emanating from the role US and UK play in appointing public office holders in Pakistan can have very devastating consequences!”
Commenting on the state and status of other developing countries, the author observes: “The situation in other countries in Latin America, Asia, Africa, etc., is not different from Pakistan. All these countries are experiencing debt crises, economic, political, and social strife and endemic conflict. The strategy I have posed for Pakistan is equally applicable to them. They need to take control of their resources and assert their sovereignty, if they want to deliver development to their countries.”
Criticizing successive governments’ failure to stand for the national interests of Pakistan, the author states: “Governments of Pakistan have been moving away from pursuing Pakistan's interests. Each Pakistani government has tried to be a more loyal and willing slay (to the Empire than its predecessor. An unequal relationship between Pakistani and US-UK has been intensified and expanded over the years. This subservience is manifest in the economic, political, and strategic areas. That Pakistan continues to sell its precious natural resources to friends and foes for peanuts, who create wealth and bring prosperity to their peoples. While Pakistani people continue to fall deeper into poverty, illiteracy and helplessness. A state cannot remain in colonial mode forever. It has to become sovereign, otherwise in the present global scenario, when big powers are assaulting states, sometimes under tilt garb of liberalism, sometimes the so-called 'war against terror', weakening of the state might ultimately lead to the perishing of the state!”
Highlighting the effectiveness and superiority of her strategy compared to IMF’s model, the author observes: “My claim that this strategy is superior to the IMF strategy is on account of the following: First, with hindsight we know that devaluations for the last many years have not increased exports. And when import demand has been reduced, it has been at a very high cost to the economy in the form of deindustrialization. We are also cognizant of the adverse ramifications of devaluation on inflation, investment, output and employment. In view of the above, I am proposing 'selective' demand restraint rather than 'across the board' demand restraint. Second, I have tried to pass on the cost of adjustment to the segments of the Pakistani population that are well to do. Third, the proposed strategy tries to break the trade-off between economic adjustment and economic growth by trying to bring about an 'expansionary adjustment' rather than a 'recessionary adjustment'. Fourth, while the IMF model tries to increase foreign exchange reserves by increasing exports only, the alternative strategy focuses on expanding exports, reducing imports, increasing remittances, raising payments from the use of our infrastructure, resources and services, and financial assets to increase the flow of foreign exchange reserves.”
Making policy recommendations for an external sector strategy, the author states: “I have formulated an external sector strategy that is a better alternative to the IMF strategy on account of the following: First, increase in exports are expected to be brought about through quality enhancement, exploring new commodities and markets. Second, the cost of adjustment, which is quite marginal, is passed on to the wealthy classes, who bear a nominal cost in the short run only. Third, the proposed strategy tries to break the trade-off between economic adjustment and economic growth by trying to bring about an 'expansionary adjustment' rather than a 'recessionary adjustment'. Fourth, while the IMF model tries to increase foreign exchange reserves by increasing exports only, the alternative strategy focuses on expanding exports, reducing imports, charging market rates for the use of our infrastructure, natural resources and financial assets to increase the inflow of foreign exchange. The short-term measures proposed in this study are selective demand management and charging market rates for the use of our infrastructure, services, and resources. This will yield a very substantial amount to the external sector.”
Expounding on other recommendations, the author notes: “I have also recommended that agreements signed between the Government of Pakistani and foreign governments and companies should be ratified by different pillars of the government, including some representation from the civil society to prevent rent seeking and corruption. The short-term measures also include banning the import of luxury and consumer goods…Moreover, essential imports can be obtained on barter/paid for in local currencies…The medium- to long-term measures include exploring substitutes for essential imports and exploring alternative commodities and markets for exports. The successive governments have not handled the repatriation of looted Pakistani assets held abroad very effectively and requires a change of strategy. I have been proposing a gold reserve management strategy since the year 2000 but successive GOPs have not paid any heed to it. Moreover, implementation of Cartagena Protocols on risk assessment and biodiversity and photo-sanitary standards will expand our export markets to the Russian Federation, Central Asian Republics, and the European Union.”
Alternative to the IMF — And Other out of the Box Solutions (Partridge Publishing, Singapore, December 2022) by Dr Shahida Wizarat is an important Book. Dr Wizarat has presented viable alternatives to IMF programs — for Pakistan and other developing nations — to gain economic and political stability. The book is an essential reading for policy makers in Pakistan and other developing nations.
