Beyond the bailout: IMF's governance and corruption gambit

The IMF’s actions in Pakistan have taken a somewhat bizarre turn. A radical departure from established norms? Perhaps. Is this extraordinary intervention a bold new strategy, or something far more unsettling? A deviation from the norm? The whispers are growing louder: the IMF is doing something in Pakistan, and it is unlike anything we have seen before.

The IMF’s Articles of Agreement, its founding document and charter, provide the legal foundation for the institution established in 1944. These articles define the IMF’s mission, structure, the rights and obligations of member countries, and the rules governing its operations. Two core roles derived directly from the Articles are: promoting international monetary cooperation and providing temporary financial assistance. In short, the IMF’s core mandate focuses on economic and financial stability.

Welcome to the Governance and Corruption Diagnostic (GCD) -- a concept really alien to the IMF’s original Articles of Agreement. Imagine, it took a staggering 53 years for the ‘powers that be’ to come up with a Guidance Note ‘The Role of the IMF in Governance Issues’. Imagine, it took 74 years to come up with a new ‘Framework for Enhanced Engagement on Governance (2018)’.

The IMF, dominated by its largest shareholder, the US (with 831,401 votes), functions as both a financial entity and a powerful political instrument. Crucially, no one forces Pakistan to seek IMF assistance. We do so because of our own repeated blunders, mistakes and policy failures.

Historically, the IMF’s establishment after World War II reflects less a spirit of global cooperation and more a calculated move to project American financial dominance. America’s dominant voting share within the Fund, effectively gave Washington significant leverage over international finance, allowing it to shape the global economic order in its own image and advance its own interests under the guise of multilateralism.

The Governance and Corruption Diagnostic (GCD), ostensibly designed to pinpoint ‘governance and corruption vulnerabilities’, will inevitably lead to IMF recommendations for Pakistan’s institutions, legal frameworks, and processes. These recommendations, of course, will become non-negotiable conditions for receiving crucial financial assistance.

The IMF’s official stance is that it encourages countries to undergo a Governance and Corruption Diagnostic (GCD); it remains a voluntary exercise.Pakistan’s IMF predicament: a self-inflicted crisis, a US-shaped solution. This vulnerability forces Pakistan to accept externally dictated conditions to heal its internal wounds -- a heavy price for past policy failures.