OPINION: Growth model and IMF conditionalities — VI |
In addition to achieving macroeconomic stability, the other goal of the extended fund facility (EFF) programme is to put the country on the path of sustainable economic growth.
Having said, an important element in achieving these goals requires enough push from the demos on public policy so that important institutional, organisational, and market reforms are carried out by the government, which are otherwise against moneyed interest, and where such vested interests over time have continued to gains influence over public policy.
Yet, the highly neoliberal and austerity-based orientation of IMF programme in general, including the ongoing Extended Fund Facility (EFF) programme, is not allowing reaching appropriate levels of social spending – for instance, in health and education sectors – which, in turn, reduces political voice and lowers the capacity of demos to make that needed push. Moreover, while under austerity emphasis of IMF programmes a lot of economic growth sacrifice is made, yet this does not – mainly for the reasons indicated above – result in programme countries in general, including Pakistan, to reach neither sustained macroeconomic stability, nor get on an inclusive, sustainable economic growth pathway.
READ MORE: OPINION: Growth model and IMF conditionalities — V
Here, among the binding conditionalities or ‘qualitative performance criteria’ (QPC) of the EFF programme in terms of quantitative conditionalities has been to reach, and sustain primary surplus – which the country has achieved over the course of the ongoing IMF programme – or positive fiscal balance under the overall fiscal consolidation effort.
The highly neoliberal and austerity-based orientation of IMF programme in general, including the ongoing Extended Fund Facility (EFF) programme, is not allowing reaching appropriate levels of social spending – for instance, in health and education sectors – which, in turn, reduces political voice and lowers the capacity of demos to make that needed push.
Having said, the ongoing article series has amply indicated – based primarily on the research highlighted in the book ‘A thousand cuts: social protection in the age of austerity’– that not only IMF conditionalities overall, including quantitative conditions, primarily fiscal consolidation, but also certain structural conditionalities like those in labour policy, over the years has on average in programme countries, including Pakistan, has significant negative causality for government spending on health.
READ MORE: OPINION: Growth model and IMF conditionalities – IV
The book ‘A thousand cuts: social protection in the age of austerity’ pointed out with regard to how the austerity agenda of IMF does not support reaching sustained macroeconomic stabilization, or economic growth as follows: ‘The austerity agenda is, at its core, only a short-term and short-sighted solution to fiscal problems. It frees up resources for government to repay debt, but damages people’s lives and livelihoods in the process. In the longer term, austerity is neither socially nor economically sustainable.
This is because social protection and good health – which are undermined by conditionality – are investments in the population, or “human capital” in the economic patios. …Without social protection policies to maintain livelihoods and stimulate economic demand, public finances will ultimately suffer and development will falter.
READ MORE: OPINION: Growth model and IMF conditionalities — III
In other words, austerity becomes self-defeating – let alone profoundly costly in social terms – and cannot remain the primary policy response to the macroeconomic problems facing countries. …Indeed, recent evaluations of the IMF’s economic policy advice by the United Nations Human Rights Council found that its advocacy of austerity systematically neglected distributional consequences and hampered the realization of basic human rights…’
Here, it needs to be pointed out that the above assertions are not criticisms based on some abstract thinking, nor on some anecdotal evidence stitched together to form some logical sounding arguments, but are based on strong reasoning at the back of visible experience of a number of countries, and deep empirical evidence, including in the book in great detail, specifically with regard to social spending, and income inequality.
Some of the underlying problems with the country’s growth model are increasingly neoliberal- and austerity-based policies, perpetuated over time under multiple IMF programmes that the country has subscribed to, and through subscription to similar policy advice by dominant ‘Chicago boys’-styled policymakers in policy circles.
READ MORE: OPINION: Growth model and IMF conditionalities — II
This has mainly resulted in unjustifiably small role of public sector, over-board privatisation, lesser regulation, and liberalization of........