Pakistan’s troubles

Pakistan has had a love-hate relationship with the IMF for years; it’s been the country’s savior and its curse. This analyst says IMF has always made Pakistan tighten up its belt, which means dropping tariffs on foreign products and reducing government spending, which has led to slowing spending on development, schools, and health. This causes taxes to be raised which hurts working people meaning they spend less and the government needs to take out another loan. The analyst says the IMF creates a vicious circle. But others say mismanagement has led to the problems. This Pakistani economist says the IMF is good for a quick fix, but Pakistan has been on quick fixes for almost 30 years. He says when Pakistan gained its independence from Britain in 1947, it built infrastructure at a fever pitch but since the 1970s, the military leaders of the country have neglected infrastructure in favor of military spending. This politician with the ruling Pakistan People’s Party agrees but he blames the West’s war on terror for its most recent problems. But generally, if countries don’t do well, such as Pakistan, banks won’t lend them money, and Pakistan has already defaulted on other loans. Some from the West say it should back out and let Pakistan deal with it on its own. This former ambassador also mentions that Pakistan has tried to develop a pipeline from Iran, through Pakistan and into India, but the Bush administration has shelved deals with the Iranians. The economist says it might be in Pakistan’s best interest to default on outstanding loans and in essence declare bankruptcy, a tactic which worked for Argentina. But Pakistani politicians wouldn’t want to go that route.