IMF or no IMF!

When the country later issued foreign-currency bond, investors bid for five times more than was on offer.

One has often been asked wheth­er entering an IMF programme is a good or a bad thing for Paki­stan? After all the lender of the last re­sort has different yardsticks for countries and Pakistan does not appear to be as a favourite. Also, invariably in a Fund pro­gramme the pain is shifted to people, growth is compressed and no real sustainable rem­edy comes out of it, because be­fore one knows the need for anoth­er programme stares in our face. Well, while the argument comes across as a strong one, the truth is that blaming the IMF for our policy follies and simply ig­noring a callous economic governance structure that perhaps by now stands embedded in the national culture is never going to help. Ironically, Pakistan is not alone in this category of countries that tend to either repeatedly go to the IMF for help or need some sort of an ex­ternal or an apex disciplining body that can help them manage their finances more prudently or ensure to put their fi­nancial affairs in a straight-jacket. Trust the current initiative of SIFC (Special Investment Facilitation Council) also in essence works on similar objectives. On a recent note Sri Lanka and Bangladesh come to mind: Sri Lanka chose to seek IMF’s help in making some difficult eco­nomic decisions, including reigning in bulging defence expenditures that oth­erwise its weak and compromised pol­iticians would never have been able to implement. Bangladesh a little while ago pre-emptively asked the IMF for $4.50 billion, while insisting that its economy is not in bad shape. With the opposition unceremoniously wiped-out by Hasina Wajid’s coercive politics, one reckons that IMF’s presence as an institution that could keep the spend­ing politicians in check came as a big relief to both, businesses and their re­spective customers.

Ghana comes across as another clas­sic example that has spent almost 23 of the past 36 years under the Fund’s su­pervision. In July 2022 it asked for yet another bail-out, its 17th. One might think that a country that keeps ask­ing for money would be a mess, but Ghana is one of the most prosperous in the region and a lively democra­cy to boot. Its problem is that its pol­iticians (starting its first president, Kwame Nkrumah, who was a diligent critic of the IMF) have been addicted to spending. The latest crisis also fol­lowed a surge of borrowing and a re­sultant economic crunch, which priced Ghana out of credit markets and raised the risk of default. Given that the coun­try had only come out of a Fund pro­gram in 2019, one opines that it must have taken some rather poor econom­ic management on part of its manag­ers to come to this head so soon. Yet when one looks a closer look, Ghana routinely notches up impressive eco­nomic growth. At $6,200, its per capi­ta GDP (adjusted for purchasing pow­er) is twice the West Africa norm. And if you take a poll in the general pub­lic, surprisingly they believe that one main reason is that it has succeeded despite its recklessness because, large­ly, it has gone to the IMF early and of­ten. No brainer here in conceding that asking for help early can nip problems in the bud. Bail-outs can be smaller and the spending cuts required to put pub­lic finances on a sound footing can be less painful. When Ghana entered its 16th programme in 2015 it needed less than $1 billion (2% of its GDP) from the IMF to regain access to credit markets. When the country later issued foreign-currency bond, investors bid for five times more than was on offer.

Also, there are not many downsides to going early. If one does so, the Fund’s lending is usually cheap (mostly at zero interest) and its involvement gives in­vestors confidence to resume lending and investing. Waiting too long before calling for help (as we saw in Paki­stan of late), by contrast, usually multi­plies misery. Zambia being another ex­ample, which defaulted before coming back to the IMF with a package require­ment that became as steep as 10% of its GDP in addition to serious needs on debt restructuring. The asking ear­ly on the other hand invariably carries some hidden pluses as well. Like for in­stance, governments in general tend to spend profligately before elections (surprisingly we saw that even the in­terim government in Pakistan, despite its non-political nature, came out as no different) and then have to resort to the IMF to soothe the post-poll hang­over. In any case, what we see is that the Fund also from his previous inflex­ible days has somewhat grown more humane. Today, it in fact encourages spending on health, education and cli­mate change initiatives. With elections approaches, perhaps it will be good to see our politicians change as well where instead of having a usual anti-monitoring or anti--IMF or anti-SIFC rhetoric, they can think of these insti­tutions or bodies like family doctors who can treat them proactively, before there gets to be a need to be carried on stretchers straight into intensive care!

Dr Kamal Monnoo
The writer is an entrepreneur and economic analyst. Email:

The writer is an entrepreneur and economic analyst. He can be contacted at

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