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May 17, 2019

An SAP world


May 17, 2019

The PTI government has entered into an IMF programme, with the claim of making it the last IMF programme. The staff-level agreement has been made and now the programme awaits the approval of the IMF executive board.

This seems to be the harshest programme of our history. Pakistan will be forced to increase the prices of energy, impose more taxes, and reduce state subsidies and lower the value of the currency. These conditions will increase inflation and unemployment and lower the economic growth rate, as well as hurt the working class and the lower middle class very badly. The economic figures might improve but living standards and incomes will fall.

The experience of the last 12 programmes showed us that the ruling class simply transfers the economic burden of IMF conditionalities on to the people. It implements the conditions that affect the poor sections of the population and the middle class. But it resists the conditions that could hurt the interests of the elite. Different interest groups within the ruling classes always resist policies that are aimed at broadening the tax net and documenting the informal economy.

The IMF imposes conditions on every country that seeks loan. These conditions are called ‘Structural Adjustment Programmes’ (SAPs). Every time SAPs are imposed in Pakistan, the life of poor people, workers, peasants, small farmers and small traders become more difficult and miserable.

When the IMF started to impose SAPs on developing countries in the 1980s, the main aim was to reduce the debt burden of these countries. But after four decades of SAPs, the debts of developing countries bloomed to new heights. Now the IMF forces these countries to allocate more resources to repay the existing loans and many countries obtain more loans to repay old loans and interests.

Generally, the IMF and neoliberal economists describe the SAPs as necessary measures aimed to reduce budget and fiscal deficits, stabilise the economy and improve macro-economic indicators. But in reality, the most important aspect of SAPs is to ensure that a country continues to repay older loans owed to commercial banks, governments, IMF and the World Bank. SAPs generally force countries to devalue their currencies against the dollar; lift import and export restrictions; balance their budgets and reduce social spending; and remove price controls and state subsidies.

As a result, SAPs often result in deep cuts in programmes like education, health and social care, and the removal of subsidies designed to control the price of basics food stuff, energy and daily essentials. So SAPs hurt the poor most, because they depend heavily on these services and subsidies. SAPs have common guiding principles, based on neoliberal economic policies including free trade, free flow of capital, privatisation, deregulation, liberalisation; and an efficient free market.

Every IMF programme contains four main features including economic stabilisation, liberalisation, deregulation and privatisation. IMF conditions revolve around these four points. Economic stabilisation means limiting fluctuations in exchange rates, inflation, and balance-of-payments. It also includes tax increases, combined with cuts on social spending, as well as more resources for debt repayment and fewer resources for education and health.

Liberalisation is a set of measures and policies designed to facilitate the free flow of trade and capital and removal of tariffs. This means opening up the economies of developing countries for multinational corporations and international investors. It means more labour flexibility to exploit workers and weaken trade unions and collective bargaining rights. Wages have been kept low and working hours increased. Workers’ rights have been under attack in the last four decades and labour laws have been changed drastically to benefit the capitalist class.

Deregulation means limiting the role of the state in the running of the economy and removing bureaucratic hurdles in business and trade. Privatisation means transferring state-owned enterprises from the state to private ownership. Privatisation has helped the capitalist class concentrate the means of production in their hands. This policy played an important role in the concentration of wealth in fewer hands – and thus created the current unprecedented gap between the poor and the rich. Inequality has increased in the last three decades and more sharply in last one decade.

Despite almost four decades of Structural Adjustment Programmes, many developing countries have not been able to pull themselves out of massive debt. Instead, their debts have arisen. SAPs have failed to help a single country achieve economic stability and growth without increasing unemployment, poverty, inequality, exploitation and repression. SAPs have, however, served the interests of big business, investors and capitalist class superbly, offering them new opportunities to exploit workers and natural resources. No country has been able to bring prosperity, stability and better life on the basis of SAPs for its people.

The effects of neoliberal policies on people everywhere have been devastating. For the poorest people in the world, the situation has become even more desperate. The people of Pakistan will bear the brunt of the 13th IMF programme and the Structural Adjustment Programme. Pakistan needs real economic reforms to change the basic colonial economic and social structure to achieve economic growth, development and high living standards. Pakistan needs an economy that can work for the benefit of all people instead of a few rich ones.

The writer is a freelance journalist.

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