'F' as in IMF.

Byline: Usman W Chohan

An International Monitory Fund (IMF) mission concluded a five-day visit to Pakistan last month, and issued a press statement that highlighted progress in several key areas. The delegation was led by their regional mission chief Ernesto Rigo, and involved visits to Islamabad and Karachi, with a view to checking the Pakistani government's policy implementation for the period since the IMF's issuance of an Extended Fund Facility (EFF).

Pakistan was deemed to be making decent headway, particularly in revenue collections and tax administrative reform. However, various structural issues loomed large, and it was pointed out that it is still too early to congratulate the country on any current initiatives. It may be inferred that Pakistan would get a report card of 'C,' but it is still too early to tell.

What is not too early to tell, by contrast, is the record of the IMF in implementing programs in beleaguered economies. The historical record of the IMF is indeed long and dismal, and rather than looking at the entirety of its performance, which is well documented elsewhere, it is useful to look at some of the recent programs that the IMF has deployed and how countries have fared therein.

An important instance of fresh provenance is Argentina. In mid-2018, the IMF agreed to offer the country a three-year loan worth nearly $57 billion; the largest in the institution's history. This was pursuant to a series of detrimental decisions by the Macri government since it was elected in 2015, including striking deals on toxic legacy debts on which the country had already defaulted, as well as going on an unsustainable multi-year borrowing binge.

The first decision was largely made to appease predatory 'vulture' hedge funds in New York, while the second decision was based on political point-scoring with Macri's voter base. Argentina's public debt, which is mostly denominated in US dollars, exploded by more than one-third, to $321 billion by 2017, and its fiscal and current-account deficits exceeded 5 per cent of GDP. An economic and crisis ensued, and public debt ballooned to nearly 90 per cent of GDP, which was met with soaring inflation and a flight of capital that caused the peso's value to collapse.

Under pressure from President Donald Trump, who has known business ties to President Macri, the IMF swooped in with its unprecedented loan. This Faustian bargain came with terrible conditionalities including scathing and far-reaching...