Global Policy Forum

By Jamila Achakzai

Civil society organisations fear IMF debt repayment at expense of development spending, recommend local alternatives to foreign debt

Representatives of leading civil society organisations on Tuesday lashed out at the government for securing loan from International Monetary Fund (IMF) to handle the current economic crisis. Addressing a news conference here, they said like always, the IMF loan would come with conditionalities that were to hit the poor very hard.

They said international financial institutions like IMF, World Bank and Asian Development Bank focused on macroeconomic stability. "In the IMF debt, the focus is often on economic gains for shorter term of three and five years, while prioritisation of debt repayment is expected to be done at expense of essential public spending on development sectors like health, education, and agriculture. Pakistan is no exception to the rulebook that the IMF has followed in its classic style of one-size fits all regimes," said Khadim Hussain, a social activist.

The representatives of Strengthening Participatory Organisation (SPO), Sungi Development Foundation, Sustainable Policy Development Institute (SDPI), ActionAid and Oxfam International spoke to the news conference. They feared a major cut in the Public Sector Development Programme. They said public spending on education and health was about 2.7 percent and 0.75 percent respectively, which was way below international benchmark to achieve Millennium Development Goals (MDGs).

The civil society representatives said the country's population, which spent nearly 30 percent of income on cereal, urgently needed support through targeted social safety-net programmes. "That will also result in reduction in agriculture subsidies and investment – 65 percent of the population is directly and indirectly involved in agriculture and need support to increase production and income," they said.

They said deal for the IMF loan could call for removal of subsidies on essential commodities and if that happened, the poor would bear the brunt at a time when inflation rate stood at 25 percent. The civil society representatives said based on the history of its conditionalities, the IMF could ask government to privatise state enterprises and assets at a time when the Western governments themselves were engaged in nationalising banks and other troubled enterprises.

"These cost cutting measures, if implemented in full and without consent of people and civil society, will prove disastrous for the poor already suffering from inflation, growing unemployment and impoverishment. They stressed that the IMF loan should not be sought at the expense of pro-poor policies. "This loan and its conditionalities should not further burden the poor in Pakistan," said Amjad Nazeer of ActionAid.

"The research has proved that the lender institutions, such as IMF, have taken back wealth and resources of the borrowers much more than the borrowed money, still the poor countries are indebted," he said. The coalition urged the government to look for local alternatives to foreign debt and take concrete measures for a long-term, pro-poor and self-reliant economic approach. Earlier, dozens of civil society workers, trade unions and lawyers took out a rally against the proposed IMF loan. They criticised the government for bad economic policies.