Our former finance minister and world renowned economist late Dr. Mahboob-ul-Haq once famously said “It is short sighted to balance budgets by unbalancing the lives of people”. No Pakistani government took his wise words seriously and tried to balance the lives of people instead of budgets and figures. Since 1988, almost every government adopted the IMF programs to achieve the goals of economic stability, prosperity and sustainable growth. But nothing could have been achieved. Even we are not ready to draw the necessary conclusions to change our economic policies and strategy.
The PTI government came into power with the promises of human development. PTI Chief Imran Khan before becoming prime minister of Pakistan was use to criticise the governments of both PPP and PML-N for not adopting the policies to develop human resource. He promised to initiate new economic strategy to focus on human development.
We live in the era of highly competitive, innovative and creative capitalist economy. Many old sectors of the economy are disappearing and replacing with new technology based sectors. This development also making some old skills redundant as they no more required. This is not happening for the first time. Capitalist productive system always make giant leap after every 30 to 40 years to develop the productive forces.
Any country that wants to develop its productive forces needs to develop its human resource. To develop human resource, the state needs to adopt pro-people policies and strategies. To achieve such goal, the government needs to educate and arm the labour force with latest technologies and techniques. The modern scientific education, knowledge, research and skill is the key to achieve the high level of human development.
The real challenge before any government is to provide equal opportunities to unleash the talent, abilities and capabilities of all its population. The development of human resource is not mean to develop the skills and capacity of its few citizens. It required a general strategy and policy to develop the skills and capabilities of its whole adult population. This would in return unleash growth of enterprise; innovation and creativity of whole mass than the fortunate few.
Now the question before us is whether adopting an IMF program could hamper the PTI government’s commitment and promise to develop human resource. Because the evidence and experiences of IMF programs around the world shows that they have negative impact on human development.
The renowned Pakistani economist Dr. Akmal Hussain thinks that IMF program could have negative impact on human development. He wrote the following in his recent article published in the News international on 27 October.
In Pakistan’s case, there are additional physical constraints to growth beyond the financial sphere, such as a shortage of electricity, gas and water. Furthermore, the lack of a trained labour force with a highly educated stratum that is capable of innovation is also a key constraint to investment and sustained growth (research by Aghion et al has empirically established that the depth and range of innovations is a key determinant of long-term growth). It is these critical institutional, governance and supply side constraints that are ignored when the IMF stabilization programmes are undertaken in the belief that ‘stabilization’ will induce sustained growth.”
Dr. Akmal Hussain further explained that the research and study done by Barro and Lee (2005) on the data from 130 countries that have adopted IMF programs draw the similar conclusion. They showed that these programmes had a significant negative effect on GDP growth and did not have a significant positive effect on investment, inflation and government consumption. A subsequent study by Dreher (2006) also clearly showed that IMF programmes have a negative effect not only on short term but also long-term economic growth.
An important study by William Easterly (2005) focuses on countries (including Pakistan) where IMF programmes have been repeatedly adopted. The results of the econometric analysis reveal that none of the top 20 recipients of repeated IMF adjustment lending was able to achieve high growth. The conclusion of Professor Easterly is noteworthy: “If the original objective was adjustment with growth, there is not much evidence that structural adjustment lending generated either adjustment or growth”.
The recent studies showed the same results. The IMF conditionalities not only reduce GDP growth, it also has an adverse effect on human development. For example, the study by three economists Kentikelenis, Stubbs and King (2016) has shown that IMF programmes have a negative effect on both growth and human development. The latest study (forthcoming) by Stubbs et al shows that IMF programmes have a negative effect on public health expenditure.
It will be a mere dogma and slogan to develop human resource under an IMF program. The strict conditionalities of IMF program will force the government to practically abandon such policy and strategy. The PTI government cannot achieve sustained growth on the basis of human development and social justice under the IMF program. Despite having the slogans of change and Naya Pakistan, the government will be forced to follow the footsteps of PPP and PML-N economic policies. So the results would be similar. IMF program is not the road that could take us to economic stability, prosperity and human development.
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17 November, 2019