Nancy Birdsall, Milan Vaishnav and Danny Cutherall's op-ed piece on the IMF was featured in The Nation.
From the Article
Several weeks ago, Pakistan indicated that it would say “thanks, but no thanks” to more than $3 billion in loans from the International Monetary Fund (IMF), as internal political issues proved stronger than the need for Pakistan to bring in much needed money. But while this incident says much about the conflict going on within Pakistan’s ruling bodies, it also shines light on the flawed American strategy of trying to use economic aid to ensure better behaviour from Pakistan’s military and intelligence services.
For the past three years, Pakistan has had an IMF programme backed by a loan of more than $11 billion. Of this, the IMF has so far released almost $8 billion in several tranches-each dependent on Pakistan’s civilian government making progress on key tax and energy sector reforms. Over a year ago, as progress on those reforms stalled, Pakistan asked for — and received — more time to comply with promised changes and collect a final $3.6 billion tranche. But at the end of September the Minister of Finance announced that Pakistan would not continue the IMF programme at all, and he has since emphasised that Pakistan would work on its own “home-grown” reform programme. Though Pakistan can go back to the IMF anytime (and indeed there were rumours recently that it would), the civilian government clearly wants to avoid locking itself into another IMF programme involving promises for reforms that it will not be able to fulfill.
Why would Pakistan, which has benefited this past year from high agricultural prices, but nonetheless is battling serious revenue problems and rising inflation, turn down big IMF money — and while pressing ahead with its own reform package, avoid seeming to seek a fresh new round of IMF money?