To know the International Monetary Fund (IMF), you need to know why it’s important in the context of current events. Especially in the context of managing public opinion by nations and why the IMF matters.

After two weeks of intense exchange of fire power between India and Pakistan, the war theatre did not break into an all out war in the region. Instead, it has now become a war of misinformation which is being fought on all social media channels. This war is in the realm of influencing the agenda of the global community or institutions in the form of the IMF. It has become a tug of war with information.

India, for its part, wants the world to see Pakistan for what it is, harbouring terrorists to wage a clandestine war against India. India wants the world to see Pakistan as a State that sponsors terroris.

Pakistan paints India as an aggressor and a regional threat. Both sides have been waging this information war for years.

Pakistan has used misformation to gain support whenever there are geo-political tensions. And it has conveniently befriended China in recent times for its economic benefits and yet it claims to be running out of money. It blames Indian aggression to be the cause of its woes.

Lo and behold it has now secured a loan of $2.4 billion, which it had negotiated in 2023, from the IMF, and is to be released in two tranches. The IMF has also recognised the risks involved in lending to Pakistan this time. More on this later.

However, bailing out Pakistan is a habitual affair for the IMF. The institution’s relationship with Pakistan represents a complex web of geo-political factors. The checks (cheque) keep on coming because Pakistan has won over the powers to be all the time.

The powers to be are not empowering the people of Pakistan, but have used every General of that nation to manage geo political power in the region. Be it to control Russia or Iran or now India – China and the U.S. are the primary partners of Pakistan in their military matters.

Let’s explore this insane history

There have been 24 IMF bail outs of Pakistan since 1958, and each time the powers to be in the country have not been able to repay loans by building a tax base, and have also failed to create good governance in its bureaucracy or for the matter transparency in its political order. It’s a State in perpetual economic crisis because its governing class is the military class which furthers only its power.

The IMF has lent over $17 billion to Pakistan to date.

In 1958, when the country was under martial law and was governed by General Ayub Khan it approached the IMF to provide succor for economic stability. Remember Pakistan has never had sustained democratic systems and always borrowed promising to go in that direction.

By 1970, although it had partially become democratic, it had borrowed $140k from the IMF. Yet, by 1977 Pakistan was back to being a military dictatorship because its leaders loved to check civilian movements by calling in the military to crack down on democratic institutions.

Let’s cut the long history short, it has borrowed money every decade since and has finally secured, in 2024, a commitment up to $7 billion from the IMF, which Pakistan will receive in 3 years. Each time the IMF lent money it was not only on the basis of going democratic, but on the basis of promises that they would broaden the tax base or become transparent.

Why does the IMF love Pakistan?

Let’s understand who runs the IMF. The institution is run by the United Nations and has more than 191 countries contributing to it. The IMF, established in 1944, is the lender of last resort to governments where its work is to promote economic growth, cooperation and financial stability in the world. The primary objective of the IMF is to reduce poverty.

Based on the above notion of its charter, the IMF is justified in lending to Pakistan. But based on Pakistan’s ineffective governance over the last 70 years should the IMF have released the funds is the question. The answer is in power equations.

The IMF’s three larger contributors are the U.S.A, China and Japan. The former, both have deep geo political interests in Pakistan because of its favourable geographical location, which has become the reason that the Americans and the Chinese covet the region. They can counter Iran or Russia or even India. The Pakistanis have obliged to embrace American and Chinese help more often than not without having to worry about the conditions that a dominant nation may impose upon them. And those conditions are conveniently ignored when a new global power struggle emerges.

This recent loan from the IMF has had the following conditions imposed on them:

• tax agricultural income
• create a tax repository, identification and registration.
• create an improvement plan based on compliance
• reform governance.
• create institutional and regulatory compliance.
• create electricity and gas tariffs
• move industrial energy consumption to a national grid
• create SEZs
• create a liberalised tax structure for pre-owned imported cars
• spend 8 percent of its borrowing for development.

Pakistan may or may not achieve these things. The problem is it must not use this fund for its military objectives, unfortunately this has been the case. The money funds the military bureaucracy and agencies.

Both the U.S & China will sell it arms, yet the IMF wants the military budget under control.

Pakistan is struggling to find itself as a growing business hub although it has a global diaspora. All economic activity of Pakistan is set in just one region, the Punjab region. The insurgency in Balochistan and its economic disparity may still win over the IMF in the long run by pleading its pitiable state of affairs.

IMF and India

India presents statistics of its economy to the IMF on a regular basis. It has not borrowed any money from the IMF since 1993 and has settled all its debts.

This indicates the rapid rise of India in doing business and alleviating a third of its people from poverty. By fixing its structural issues and widening its tax base, in the form of income tax and corporate tax, it has the ability to take care of paying back its borrowings from international institutions. By privatising many sectors it has been able to become a global economic powerhouse.

Although India’s economic status has improved, it is its institutions, including the rule of law, that has prevailed in its extraordinary growth of its private and public sectors.

India now has a rising middle class. Its businesses are attracting foreign investment enabling companies to aspire globally and capture the domestic market.

All of the above when combined with a political order that works with institutions – such as an independent judiciary, the legislative, a free media – will see growth. In the end it is transparency and accountability of institutions that will see a nation overcome its challenges . India has managed to move the needle and manages its challenges stemming from many things, unfortunately Pakistan has not.

Its people suffer under narratives and mismanagement. Its fate continues to depend on the support of the global community which will eventually realise that it is the most dangerous nation on the planet with nuclear power. Perhaps this is one of the reasons why the IMF wants the world community to keep the peace. Therefore the public agenda in the IMF is always in favour of Pakistan because it plays the victim in the global community and the powerful nations know it’s a false narrative, but still continue to support it.

Let’s not forget that the Pakistani government harboured some of the most horrible terrorists on earth and one of them was Osama Bin Laden. When you are in politics you know that the public suffers from short term memory, and Pakistan is the master of this. Institutions backing it have to wake up.

Hopefully Pakistan will keep the peace and work towards economic development rather than brow beating India’s sovereignty.