Counter-Statement

October 21, 2010

The Notorious IMF Bailout Plan

Filed under: Non-Political — Rana Fahad @ 12:50 am

Whenever we are criticizing IMF bailout plan, we have never reached to a conclusion that whose incompetency has put us in situations to go for bailout.  When we try to blame any government, dictator or political party, discussion becomes political and ends without any conclusion. We watch such drama everyday on each news channel when every talk show, on any topic, ends without conclusion. Unfortunately, I do not have guts to label any Government “responsible” for today’s situation that is why I am only criticizing IMF bailout plan.

Shifting from “conspiracy mode” to “realistic mode”, IMF has been criticized heavily throughout the world for its policies. It has been observed in the past that IMF has failed in understanding the ground realities of the borrowing country and applying same economic policies. For instance, for some countries, devaluation of exchange rate could help, but it is not necessary that you apply the same formula in every case. In a same way “free market policies” and “privatization” is not beneficial for every situation and you cannot go for privatization in every country. It can lead private monopolies which will exploit customers, in the end. In 1997, during Asian crisis, IMF insisted on deflationary fiscal policy (which means cutting in spending and rise in taxes) and higher interest rates. The policy created minor crisis into an economic recession and unemployment rate shot upwards in Thailand, Indonesia and Malasia. Chief economist of the World Bank, Joseph Stiglitz blamed higher interest rates for Thailand’s recession.

IMF has failed number of times in understanding and learning the economic atmosphere of the borrowing country. In 1990’s, during the intervention in Kenya’s economy, IMF applied its conventional policy and made the Central Bank remove controls over flow of capital. The policy gave an easy passage to corrupt politicians to transfer their illegal money out of the economy.

Jamaica has blamed IMF for taking the ability to decide their national policy. IMF intervenes and dictates the policy and the elected body of the country is forced to follow the ideology and interests of developed countries. The head of the Harvard Institute for International Development, Jeffrey Sachs, said: “In Korea the IMF insisted that all presidential candidates immediately “endorse” an agreement which they had no part in drafting or negotiating, and no time to understand. The situation is out of hand…It defies logic to believe the small group of 1,000 economists on 19th Street in Washington should dictate the economic conditions of life to 75 developing countries with around 1.4 billion people.”

Same is the scenario with Bailout plan of Pakistan. IMF is implementing its conventional strategies or the strategies of its own interest. Like Asian crisis on 1997, interest rates or taxes are high and the whole burden is on general public. Same like Jamaica, we cannot have our own policies with our national interests. Like Kenya, state bank do not have control in flow of capital and what was done in Korea, we, 1.4 billion people are dictated by only 1000 economists.

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3 Comments »

  1. ok I understand that IMF’s policies are not according to the ground realities, I ask a question here. Lets say if IMF Policies are good enough to get the economy going, do you think they will ever want that you become a self sustaining economy(Having the capitalistic approach in mind)?

    Comment by Asad Durrani — October 21, 2010 @ 4:15 pm | Reply

    • In the start of the article, i have written “Shifting from “conspiracy mode” to “realistic mode”, so dont go in that direction :p

      P.S: Believe me i also think on the same lines as you do 😀

      Comment by Rana Fahad — October 21, 2010 @ 4:26 pm | Reply

  2. believe me I was gonna write at the end that I am not in Conspiracy mode, believe me 🙂

    Interest is not declared Haram by me, thrs a reason…

    Comment by Asad Durrani — October 21, 2010 @ 4:29 pm | Reply


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