White Paper on the IMF Extended Fund Facility

Programme 2019/20-2022-23
Tehreek-e-Labbaik ,Pakistan

Published and Released by

Tehreek-e-Labbaik Pakistan

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 Table of Contents
A. Introduction ............................................................................................................ 4

B. The Coming Global Recession ............................................................................. 6

C. The Fallacies of Vodoo Economics........................................................................... 14

C.1. General .................................................................................................................. 14

C.2. Vodoo Theoretical Presumptions ...................................................................... 25

C.3. Equilibrium ........................................................................................................... 26

C.4. Competition .......................................................................................................... 29

C.5. Globalization ........................................................................................................ 31

C.6. Openness ............................................................................................................... 34

C.7. Determination of Output, Employment, Investment and Profit .................. 37

C.8. Usury/Interest ...................................................................................................... 41

C.9. Exchange Rates .................................................................................................... 50

C.10. Taxation and Fiscal Policy ................................................................................ 55

D. the IMF’s EFF (2019-23) Program ............................................................................ 62

D.1. Assumptions of the EFF ..................................................................................... 62

D.2. The IMF’s EFF 2019-23 ........................................................................................ 78

D.3. IMF Surveillance and Espionage Mechanisms ............................................... 86

D.4. IMF Policies .......................................................................................................... 91

E. Assessment .................................................................................................................. 97

Table: Difference between Actual Outcomes and IMF forecasts for major

macroeconomic statistics with IMF’s EFF module 2014-2015. ..................................... 97

F. The Alternative .......................................................................................................... 121

F.1. Objective of the Alternative Program.............................................................. 121

F.2. Militarization of the Economy .......................................................................... 123

F.3. Macroeconomic Stance ...................................................................................... 124

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 F.4. Foreign Trade ...................................................................................................... 127

F.5. Exchange Rate and Trade Flows ...................................................................... 129

F.6. Monetary Policy.................................................................................................. 131

E.7. Debt Management .............................................................................................. 133

E. 10. Alternative Policies: A Summary.................................................................. 142

Statistical Appendix ...................................................................................................... 147

Table A.1. Pakistan: Selected Economic Indicators, 2014/15-2019/20 1/ ................ 147

Table A.2. Pakistan: Medium-Term Macroeconomic Framework, Program

Scenario, 2016/17-2023/24 .................................................................................................... 148

Table A.3. Pakistan: Balance of Payments, Program Scenario, 2016/17-2023/24 (in

millions of U.S. dollars, unless otherwise indicated) ...................................................... 149

Table A.4. Pakistan: Gross Financing Requirements and Sources, Program

Scenario 2017/18-2023/24 (in millions of U.S. dollars unless otherwise specified) ..... 150

Table A.5. Pakistan: General Government Budget, Program Scenario, 2016/17-

2023/24 (in billions of Pakistani rupees)............................................................................ 151

Table A.6. Pakistan: Monetary Survey, Program Scenario, 2014/15-2019/20 ....... 152

References....................................................................................................................... 152

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 A. Introduction
Tehreek-e-Labbaik Pakistan is increasingly concerned about

Pakistan’s continuing loss of sovereignty to imperialist powers and their

global management agencies. We regard the IMF Extended Fund Facility

Programme which commenced in September 2019 as an imperialist ploy

to hollow out the Pakistani state and further subject it to imperialist

hegemony. All Pakistani secular parties support this programme – none

have called for its repudiation – thus endorsing Pakistan’s intensified

subservience under global imperialist, capitalist order. Tehreek-e-

Labbaik alone stand for building a resilient nationally self-reliant

economy.

Tehreek-e-Labbaik call for an immediate repudiation of the IMF

agreement because:

 It seeks to increase the Pakistani economy’s dependence on

global capital and commodity markets at a time when the

world economy is teetering on the verge of another

catastrophic recession having failed to fully recover from the

crisis of 2008-2009.

 It is grounded on false theoretical premises. The Vodoo

economic presumptions underlying its macro-projections do

not reflect global or national economic realities and the

implementation of policies built upon these presumptions have

repeatedly failed to realize sustainable and equitable growth.

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  The programme’s performance, monitoring and

implementation process is specifically designed to subvert

decision-making processes in Pakistan’s key state institutions –

the State Bank, Ministries of Finance and Commerce, the

federal and provincial tax collecting agencies, Securities and

Exchange Commission, provincial departments of finance,

customs offices etc. – and to convert them into agencies of

colonial rule, subservient to imperialist regulation,

management and control.

 The programme aims to destroy the Islamic character of

Pakistan’s informal economy by making the earning of Halal

Rizq impossible through the spread of usury based

transactions and the documentation process.

 It completely ignoring the serious environmental crisis that

Pakistan is facing and its impending impact on the national

economy.

We substantiate these arguments in the following section.

 The coming global recession

 The fallacies of Vodoo Economics

 Salient features of the IMF program

 An Islamic critique of the IMF program

 Our alternative vision.

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 B. The Coming Global Recession
The Program aims to accentuate Pakistan’s dependence on the global

capitalist economy. The adverse impact of this dependence was well

illustrated in the wake of the 2008-2009 crisis which originated in the

United States but quickly spread to engulf many developing countries

whose aggregate average growth rate turned negative in 2009 and after

a weak recovery the following year have been on a downward trend

throughout 2011-2019 (IMF, 2019). During the boom period (roughly

2001-2007) almost all developing countries had adopted export oriented

macro strategies involving a suppression of domestic consumption and

unit wage costs.

During the boom period capital was flowing out of the developing

countries in the form of central and commercial banks reserves lodged in

developed ‘safe’ havens especially the US Treasury Bill market

(UNCTAD, 2018). This depressed domestic investment rates in

developing countries and increased the dependence of these countries

on imperialist finance. Moreover macro vulnerabilities increased as debit

rose massively in most developing countries to compensate for stagnant

or declining real wages.

During the crisis period – and intermittently in short ‘recovery’

phases these increased macro vulnerabilities have cost the developing

countries dearly – growth rates have plummeted, employment fallen,

net capital outflows increased, export growth declined and bank sector

‘infection’ has surged. Moreover there the governance and regulator

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weaknesses that characterize global financial systems remain

unaddressed, focused on the futile attempt to suppress ‘terrorist’

finance. Otherwise all attempts at repairing global financial regulatory

regimes have been marginal, cosmetic and demonstratively ineffective –

even the Dodd Frank Act of the United States is on the verge of being

replaced. Developing country vulnerability to a future capitalist global

systemic crisis is much greater than in 2008.

The strategy of suppressing domestic demand and focusing on

export growth has drastically reduced the global competitiveness of

developing countries. This is reflected in their bourgeoning trade deficits

throughout the ‘post crisis’ phase (2010-2019). While during this period

the US trade deficit averages around 0.5 percent of global GDP and large

trade surpluses exist for Europe (especially Germany) Japan and China.

In developing countries while imports have surged export growth has

been at a continuously declining trend since 2010 (IMF, 2019).

Comparing the period 2000-2007 to 2008-2018, we find that global

growth rates have declined on average by almost 30 percent – despite

the minor uptick in 2018 there has been virtual stagnation since 2014 and

the forecasts for 2019-2020 are especially gloomy (IMF, 2019). The mini

‘recoveries’ of 2010 and 2018 have been shown to be limited, fragile and

quickly brought to an end.

Another striking feature of the global capitalist management system

is its incessant fueling of inequalities. Even in the global boom period

2000-2007, real wages stagnated in the developed economies while per

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capita income grew rapidly. During the boom period a great share of the

increased income was captured by stock brokers, corporate executives

and financial rentiers in the developed capitalist countries. Since 2011,

the share of developing countries in global GDP has stagnated.

Inequality is particularly marked in large developing countries

following export oriented policies such as India and China.

Thus during 2010-2016 in China the bottom 50 percent of the

population’s share of income growth was 13 percent while in India it

was 11 percent. The share of the top 10 percent of the Chinese

population in income growth during 2010-2016 was 43 percent and in

India it was 66 percent (Chanal, 2018). A CEO of a leading multinational

in the garment sector could earn in just five days what an ordinary

Bangladeshi garment worker could earn in his entire lifetime (Chanal,

2018).

Another salient feature of developments in the world level is that

trade globalization has come to an end. During 2001-2008 trade grew

significantly faster than global GDP. Since 2011, growth in world trade

has collapsed. Global supply chains are disintegrating. Inter-industry

trade has declined. Much of the decline in trade values is attributed to a

collapse in prices. Collapse in prices growth during 2010-2018 (only 0.5

percent per annum) has meant that during this period trade values

growth has been much below output value growth at the global level –

in 2017 global trade values were 15 percent below those of 2011. Terms

of trade have declined for most developing countries and Pakistan like

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other large developing countries has been able to maintain aggregate

export earnings – only by increasing export volumes.

Decline in trade earnings has led to increased competition pressures

in global markets as more and more developing countries engage in

suicidal ‘races to the buttom’ through price and wage cutting.

Particularly alarming for Pakistan is decline in South-South trade

implying a major potential reduction in Chinese imports.

Declining terms of trade are exacerbated by the trend towards

accelerated Rupee devaluation which does nothing to stimulate export

demand for Pakistan since our major exportable are not price elastic.

Devaluation along with increased speculation in the cotton and rice

markets as commodity prices plummet threaten to further destabilize

our macro economy.

An outward oriented macro-economic strategy is necessarily a debt

focused strategy. This can clearly be seen in the case of China where the

debt to GDP ratio has more than doubled during 2008-2018. India also

faces an acute problem of corporate debt overhang. China’s increased

integration with the global economy has meant a gradual decline in

China’s trade with developing countries –China’s imports from

developing countries have seen a declining trend. Chinese macro-

strategy today focuses on accelerated import substitution – which means

replacing developing country imports with domestically produced

goods and substituting in country supply chains for supply chains

linking Chinese production and assemblage production to developing

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country based firms. China today is much less likely to play an export

stimulant role for Pakistan that it did for the Southeast Asian economies

in the previous two decades. Similarly, expectations of CPEC related

investment are exaggerated – Chinese FDI to Pakistan has already fallen

in 2018-19; Chinese global financing agencies – the Silk Road Fund, the

Asia Infrastructure Investment Bank and China Exim Bank – are over

stretched and have limited resources in comparison to OBOR

investment targets and are dependent on finding local and global

financers and partners. Given adherence to IMF growth strangulating

strategy domestic investment to supplement Chinese inflows will

simply not be available. Infrastructure investment by Pakistani private

sector has always been miniscule.

Compounding risks for a sustained global recovery is an imminent

trade ‘cold’ war (and it may become ‘hot’ at a moment’s notice).

Trump’s “make America great again” project implies a gradual

disintegration of the liberal international trading system. He has been

erecting tariff and new tariff barriers against not only China but also

Europe, Canada and Japan. He is destroying America’s GSP regime and

imposing restrictions on American technological exports. His trade

policy is deeply embedded as an instrument in his ‘war on terror’

Geopolitical uncertainties are exacerbating systemic breakdown

tendencies and accentuating the trend towards global economic

stagnation.

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 Imperialism, in its financialised phases is on the verge of self-

implosion. As global stock markets and currency markets are liberalized,

emerging markets become targets of currency trade speculations with

cheap capital inflows and out flows thus increasing macroeconomic

vulnerabilities and price and output volatility. In the absence of capital

control even a whiff of ‘bad news’ can lead to a major capital flight and

sudden accelerated currency depreciation. Market equilibrium is an IMF

fantasy, a myth, an illusion, a ‘will of the wisp’ – in the real world of

finance capitalism it appears and disappears at meteoric speed.

Moreover, in its quest for never-ending capital accumulation,

capitalism is destroying the natural environment. In this era global

warming, ocean acidification, air pollution, deforestation and

desertification have accelerated and threaten to destroy life on earth

within the foreseeable future. The switch from fossil fuel sources is slow

in most developed capitalist countries – and in China. Moreover, the

sustainability of a major shift to the alternative energy sources is itself

limited as the world is rapidly running out of the mineral and

agricultural resources necessary for the introduction of solar, wind and

nuclear energy and biofuels – especially water. A small number of

‘critical minerals’ upon which the production of almost all cutting edge

technologies (digital manufacturing, weapon system and smart

consumer products) depend are being exhausted and competition to

possess these ‘critical’ raw materials is intensifying with major

geopolitical implications.

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 In any case, there are as yet no signs that there is a major move away

from fossil fuels according to the 2017 estimate of the International Panel

on Climate Change. Carbon emissions are at their highest level ever and

increasing. The world’s major oil and other conventional energy

multinationals have immense potential influence on policymaking and

havebeen using it effectively to slow down the transition to non-fossil

fuels. The China Belt and Road Initiative (CBRI) is designed to stimulate

fossil based energy production and CPEC energy projects are likely to

have a major environmental impact on Pakistan.

The global intellectual property regime is specifically designed to

promote imperialist control over strategic minerals and metals and

imperialist resource diplomacy is invariably supplemented by economic

sanction, establishment of military bases, ‘humanitarian’ interventions

and occupation as illustrated by the example of Iraq, Libya and several

West African countries. Pressure will be mounted, especially by China,

for making long term mineral and metal supply deals.

The German Mineral Resource Agency in a study published in 2016

found that for Lithium, light rare earth metals, Indium, Gallium, and

Tantalum, demand would far outstrip supply at the global level over the

next two decades. China seems especially eager to secure global sources

of light and heavy rare earth metals.

Water is soon likely to become the major source of resources conflict

and the transition to alternative technologies – especially wind and solar

– will carry a heavy cost in water quest. Conflicts over land and food are

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also likely to emerge. China faces intense water scarcity and is also

desperately short of copper and iron ores.

Advances in geo-engineering have been the conventional response to

tackle problems associated with environmental depletion but typical

geo-engineering ‘solutions’ have merely served to shift the problem

from energy to other sources. In any case most technological ‘fuels’ are

at present not available for Pakistan.

Pakistan is a water stressed country, highly vulnerable to

environmental depletion. The IMF program says not one word about

facing up to the environmental challenges. This is one of its major

shortcomings. Nor does it recognize the immense political

vulnerabilities that will be created by increasing Pakistan’s dependence

on global finance and commodity markets. The markets are subject to

imperialist governance and most capital flows to Pakistan are

determined by geopolitical considerations. Pakistan is such a miniscule

player in global trade and finance that multinationals and financial

powers have virtually no state in its economy. Increasing Pakistan’s

dependence on global market forces amounts to intensifying its

subsumption with imperialist order. The pursuit of an anti-imperialist

foreign policy focused on the promotion of national self-reliance

becomes impossible in these circumstances. The IMF is an imperialist

agency and its purpose in ‘supporting’ Pakistan is to deprive the

Pakistani state of its independence and its sovereignty.

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C. The Fallacies of Vodoo Economics
C.1. General
The economic theory which underpins IMF policy presuppositions,

intentionally or unintentionally, paints a manifestly false picture of the

functioning of actually existing capitalist economies. Global capitalism is

a socio economic formation dominated by an individuality obsessed

with lust and greed subject to increasing pressure of market competitive

monopolization and financial speculation. Exacerbating inequalities is a

fundamental feature of this system (Pickety, 2013).

With the advent of Trump (and similar neo-fascists in Hungary,

Poland, Austria and China) capitalism has entered a phase in its history

where neo liberal tendencies are struggling with what is known as

‘paleoconservatism’ – an attempt to combine capitalist order with

western traditions (especially Republicanism). This eventually involves

a reconstitution of the global management order to serve the national

interests of the West (especially America).

The neoliberal presumption is that economic wellbeing is served by

the marketization of society and the reconstitution of the state wherein

the ‘reform’ of the state (by the neutralization of money, increased

bureaucratization to monitor and administer market policies and

increased exposure to global finance). Neoliberalism aims at

depoliticization of the policymaking process which is of course itself a

political project. This political process of depoliticization depends

eventually on the performance of increasingly stringent regulatory

regimes and the paradox that neo-liberalization has always faced is that
14
regulatory regimes are necessarily subject to capture by what it

describes as ‘vested interests’. True ‘vested interests’ are those who do

not subscribe to the fake presumptions underlying Vodoo economics

and those who do not accept the neo-liberal definition of economic

wellbeing.

It is the failure of neoliberal policies in America and Continental

Europe to deliver on its promises for a large mass of the people which

has led to the emergence of paleo conservatism that seeks to continue

the globalization process but to twist it to make it an explicit contributor

to White systemic hegemony, emphasized by the concern to promote

and preserve Western pagan and pseudo-Judo-Christian customs and

the traditions. Thus the IMF, like all other imperialist agencies, is

irrevocably committed to ‘modernizing’ – i.e. Westernizing – its client

states. Fueling resentment against non-modernizing (i.e. Islamic)

cultures is an important political resource for paleoconservative forces

especially in imperialist client states.

Paleoconservatism is a project for a particular repolitization of Satan

of the global order which neoliberalism has sought to technicalise. The

specific form of re-politicization of global order that paleoconservatism

seeks necessarily involves increased doses of authoritarianism and a

dilution of national democracies – as reflected in the de-sovereignisation

of IMF client states. It is appropriate to recall that globalization is

originally a project of the Nazis, theorized by Helmut Schmidt – the

much loved figure of the heroic entrepreneur – much loved by both new

15
liberals and paleoconservatives – is of course a semi-fictitious

reconstruction of Nietzsche’s ‘Übermensch’.

Paleoconservatism is neoliberalism reconstituted through

politicization of global order for asserting the superiority of the white

race and pagan Western civilization. Paeloconservatism charts a new

course for the exercise of global hegemony by America.

Paleoconservatism (correctly) recognizes Islam as the principal enemy of

capitalism and modernist jahiliya. Peaceful coexistence between Islam

and Western civilization is seen as impossible hence its political project

is not to reject globalization but to reconstitute it through sub-national,

international and bilateral alliance systems focused on promoting

Western hegemony and de-constituting Islamic individualities and

Islamic social order.

Despite its preference for bilateral deals paleoconservatism remains

committed to the increased globalization of American regulatory

regimes and monitoring and supervision of client policy regimes by

institutions such as the IMF, FATF, and IPO etc. which have been turned

into sub-offices of the American state system.

The policy shifts are occurring in a world characterized both by

decelerating macroeconomic tendencies in the metropolitan countries

(where annual average growth over the next few years is ‘optimistically’

forecast at between one and two percent by the IMF itself) and the

immiserising growth of so called ‘emergent’ economies characterized by

growing levels of income and wealth distributional inequalities and the

16
expansion of low paid income flows serving western markets and

multinationals and finance houses is also slowing down. Burdening

client states with debt is a key strategy for promoting American

hegemony with this reconstituting global system.

American capital benefits enormously from this ongoing process of

globalize politicization. It is linked to deals with foreign states and

markets governed by imperialist regulatory regimes – one of whose

executive is the IMF. The paleoconservative penetration of neoliberal

global order is increasing capital’s inherent tendency to concentrate and

centralize.

The Vodoo economics theory to which the IMF subscribes regularly

has been the source of state economic policymaking since the 1980s and

the crises of 2008-2009 as well as its aftermath has shown it to be an

unmitigated failure. The strategy adapted to deal with the 2008-09

threefold crisis – of banking, public debt and democracy – has failed to

restore significant and equitable growth – in 2019 (up to July) the IMF

had downward revised its growth rate estimates for the fourth

consecutive time. Developed countries’ attempts to stimulate their

economies by fiscal and monetary policies had proved quite ineffective.

Tax mobilization limits have been reached and the reliance on the Laffor

curve myth – that lower tax rates lead to higher aggregate tax revenue –

has been shown to be false. Tax revenues of the rich states have been

falling and tax regimes have become ever more regressive as corporate

and bank income tax rates have been low and declining. Fiscal deficits

17
have been rising as has public debt. The concern has been not so much

to reduce public debt but to manage it in such a manner that the credit

worthiness of the ‘debt state’ is restored within international financial

markets.

Attempts to strengthen bank regulatory regimes have been cosmetic

rather than substantial. It is now clear that a global state – acting in the

interests of global (rather than specific national) capital is required for

effective global neoliberal financial regulators and that international

financial agencies – such as the IMF, ECB and BIS – are toothless tiger as

far as this is concerned – their role is limited to bullying poor countries.

America is afraid of tightening the financial regulatory regime lest it

constrains the supply of bank credit. Today almost no one believes that

enough has been done to make the global financial order safe from

undergoing another crisis. American banks are heavily under-

capitalized – with an average equity to capital employed ratio of about

six percent for the leading American banks (which accounted for 60

percent of total US bank assets in 2016). Adnati and Helocong (2015)

argue that ‘adequate’ capitalization ratios would be between 20 and 30

percent. Banksin America, throughout Europe, China and India remain

heavily loaded with bad debt.

In 2019, average public debt of the 20 OBCD countries exceeded 100

percent of GDP up from 68 percent in 2009 – an average growth rate of

about 6 percent. Never before in capitalism’s history has recovery been

18
as sluggish as it is today. The future forecast is for declining growth,

increased inequality and rising debt (both public and private).

At the 2015 IMF annual meeting Larry Summers famously forecast

an impending long dure of stagnation. Stagnation makes debt reduction

all the more difficult. Nobel laureate Paul Kingman supported him and

has developed a bitter critique of austerity economics and Vodoo

(neoclassical) theory ever since. His call for a return to the failed

Keynesianism of the 1960s and 1970s however is quite unviable became

it is this Kegnerianpolicy which lead to Stagnation of the 1970.(and will

assuredly do it again) and secondly because of the changed political

economy of postmodern capitalism where central banks have become

the real government of almost every capitalist country insulated from

voters, parliaments other factions of the state democracy.

The expansion of the central bank credit – through quantitative

earning and interest rate cuts – has failed to stimulate real investment.

Revitalizing economic growth is beyond the capacity of central banks

committed to a monetarist policy stance. In the major capitalist countries

fiscal and monetary policies accentuate stagnation. Rising debt levels

have failed to absorb the surplus capital that has been generated by

‘austerity’ economics. Placing limits on state borrowing is a sure recipe

for institutionalizing economic stagnation.

Faith in Vodoo economics of establishment, economists and leaders

(both technocratic and political) remains unshaken despite the fact that

each attempt to overcome stagnation – through private credit regulation,

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lowering of interest rates, quantitative earning measures, management

of public debt – leads to the emergence of new problems while

stagnation intensifies after every “recovery”. Why is this so? During the

previous major crises of capitalism – in the 1930s – a new theoretical

orthodoxy Keynesianism replaced neoclassical economics as a

mainstream policy paradigm. Today there is no such development in

sight. If anything, the grip of Vodoo economics on the minds of

policymakers is stronger than ever.

There are two primary reasons for the continued dominance of the

Vodoo policy paradigm. First and foremost, it reflects the moral and

religious degeneration of the masses, corrupted by several centuries of

capitalist hegemony. Life hereafter has become an illusion and building

a “heaven on earth” – through rampant consumerism, the de-

feminisation of women by devaluing motherhood and bringing them

into the labor force and population control – is endorsed as a desirable

project. Vodoo policies through the fueling of private debt facilitate

unsustainable consumption expansion among the mass. It stimulates the

growth of greed and lust and constantly constructs and expands a mass

base for the spread of the new “spirit of capitalism” by combining

neoliberal and paleoconservatism themes and discourses.

Secondly, Vodoo policies facilitate an enormous growth in the

concentration and centralization of capital so that those who have most

thoroughly internalized the “spirit of capitalism” – the top one percent

of wealth holders are enabled to fuel their lust as never before. As

20
distributional inequalities grow in Vodoo infested societies the power of

the top one percent grows exponentially and ordinary people are

transformed into subject of post-democracy – the Mustdha’feen of the

postmodern precariat.

Post-democracies are ruled by lust and fear – lust for goods and fear

of precariousness. Governance is reduced to a combination of the rule of

law of capital and the provision of democratic entertainment.

The precariousness of Vodoo policy itself is reflected in the

depressed “recovery” periods and prolonged slumps it generates in the

crises proneness of the precariously (un)balanced financial system and

the mounting burden of the public and private debt – which at the

global level is rapidly approaching the $100 trillion mark. It is also

reflected in the reconstruction of capitalism as a system of technocrat

economic administration.

Equally important is the continuing fiscal crisis of the capitalist state

subject to Adolph Wagner’s law of rising public expenditure to cover the

externalities of expanding markets. The taxable capacity of a Vodoo state

soon comes up against a limit – because it dare not tax the wealthy

(corporate and banking taxation is continually reduced) and because the

taxability of the mustadha’feen is rapidly exhausted. Increased taxation is

a means for benefitting the controllers of capital for they can pass on the

taxes laid on them through price mechanisms while the mustadha’feen

bear the whole burden. Hence, typically, the Vodoo tax state is

inevitably transformed into a debt state. Tax revenue becomes

21
increasingly a source of the income of both domestic and foreign usurers

and as finance markets are integrated internationally tax revenues from

poor countries are increasingly utilized to serve the enormous credit

needs of America, China and Europe. Contrary to the assertions of “the

common pool” theory it is the one percent whose income and wealth has

been rising exponentially in the Vodoo era – it is they who are

undertaxed and thus responsible for the endemic fiscal crises of the

capitalist state. The taxation policy of the Vodoo states seeks not a

reduction in aggregate debt but an increase in the government’s ability

to serve domestic and foreign usurers and loan sharks.

The one percent – the overwhelming majority of financial asset

holders – has a built-in interest in increasing public debt along with

increasing the state’s capacity to serve it. Not only do they earn income

from public debt investments, the more a state borrows the more

dependent it becomes on financial markets thus enhancing the power of

the one percent within the political system. Lenders to the government –

both domestic and especially foreign – become a political constituency

within the Vodoo state. Retaining creditor confidence becomes an

imperative of Vodoo state policy – linked to financers (both domestic

and foreign) by contractual ties, the ‘rights’ of the financers are derivable

from enforceable civil law (not from the constitution). As Wolfgang

Streek argues, the Vodoo state is a Markwolk (a money republic) – a

state dedicated to the service of its usurers (Streeck, 2017).

22
 Who are the Markwolk ? Who sets global bond prices, interest rates,

currency exchange rates? The IMF presumption that there is competitive

“equilibrium” reflecting economic fundamentals in global bond, loan

and currency markets is nothing short of a sick joke. Competitive

“equilibrium” is nothing but a delusion of Vodoo economics – at least in

the short run when it shifts massively from moment to moment

unleashing creative destruction. Bond and currency markets are so

heavily monopolized that capitalist policymakers do not dare publish

data about their market demand structure. We know some names of

leading dealers – Calpers, PIMCO – but we do not know their market

power. We do not – perhaps cannot – know who determines the

mythical equilibrium, exchange rate (around which REER of our

country is seen as oscillating) or who determines the prices of our Sakuks

and Eurobonds. The credit worthiness of a debt state is determined by

the market strategies of a small handful of usurers dealing in its bonds

and currency. In Pakistan where the global debt profile is heavily

skewed towards financing from foreign governments and their

multinational agencies, credit worthiness is determined by our

subservience to the imperialist policy agendas.

The sovereignty of Vodoo states is limited by policy measures – such

as the imposition of a ceiling on public debt accumulation, privatization

and cutting back of defense and development expenditure. In practice,

Vodoo states exercise sovereignty only over the mustadha’feen – the

Markwolk and the international usurers usurp state sovereignty. Today

23
all Pakistani secular parties endorse this transformation of the Pakistani

state – none have committed themselves to an explicit rejection of the

IMF agreement In June 2019. Shahbaz Sharif spoke of the need for the

constructional consensual macroeconomic policies. The growth that is

sought is growth that enhances debt servicing capability – there is a

realization that too much proportionate (not absolute) growth of debt

can have a negative impact on GDP growth (Reinhart & Rog, 2009).But

no one knows how to square the circle i.e. ensure debt servicing

sustainability while stimulating growth. However in Vodoo states it is

clear that servicing debt – avoiding defaults whatever the cost – takes

precedence over growth concerns. This is because the political power of

the one percent depends crucially on the continued approval of

imperialist governments and markets. Unilateral debt reduction can

never be envisaged by a Vodoo state.

The debt state is necessarily subservient to imperialist order. Its

claims to sovereignty are dependent on its complying with the dictates

of global capitalist markets and imperialist governments. Measures

disciplining ‘failed’ (i.e. non Vodoo) states are economic (sanctions,

suspension of capital flows) and political (R2P, subversion, occupation).

Suspending global usury payments is a first step towards revolting

against capitalist order and therefore metropolitan countries, their

international organizations and world financial markets combine in

efforts to prevent default by poor countries. This is one of the most

important policy priorities of the international financial management

24
system – indeed a (if not the) ‘raison d'être’ for the existence of the IMF.

Almost all of the financing made available to debt burdened countries

finds its way back to international financial markets and imperialist

governments. None is earmarked for development financing.

The IMF is one of several guardians of the global capitalist financial

system. It is irrevocably committed to a legitimacy of imperialist

financial order and so basis its policies on the absurd economic

orthodoxy – Vodoo economics – which provides a theoretical

justification for global capitalist rule. The IMF takes little notice of the

very significant cumulative departures from this absurd theoretical

paradigm that capitalist practice routinely manifests. In what follows we

will seek to explain why the policy presumptions of the IMF necessarily

fails to realise sustainable growth within the context of the global

capitalist system. In other words we will try to explain why Pakistan has

had to go back for an IMF EFF just three years after the “successful”

completion of its previous EFF program (2013-2016).

C.2. Vodoo Theoretical Presumptions
Vodoo economics emerged in the late 19th century. It aims not to

describe actually existing capitalism but to paint a fairytale picture of the

supposed optimality of capitalist order. Its assumption of rational

expectations and universal utility maximizing behavior has been shown

to be false by behavioral economics. Its fantasy of perfect competition

has always been nonexistent and its doctrine of compulsive profit

maximization has been conceivably refuted by the theory of managerial

economics. Its concept of the single representative agent – derived from

25
an aggregation of the behavior of individuals – is manifestly over

determined. Its presumptions preclude the possibility of conceiving of

competition as a warlike turbulent system, recognizing the non-

neutrality of money and of effective demand as a stimulant of real

output growth. Its assumption of perfect knowledge and stable

(forecastable) expectations, instant recovery of “equilibrium” by

“efficient” markets and automatic adjustment by the interest rate to

produce full employment and realization of potential output have not

been empirically validated anywhere in the world. According to Vodoo

economics crisis – mismatches between aggregate supply and demand

in “real” and loan markets – are self-correcting through automatic

interest rate adjustments and contra cyclical policy is always harmful – a

presumption that takes no account of how capitalism has actually dealt

with its major crises of 1929-1933 and 2008-2010. Equally absurd is the

Vodoopresumption that inflation is always a full employment (demand

side) phenomenon and that growth in money supply can never

stimulate short run output growth. Equally fictitious is the Vodoo tale

that free trade and state unimpeded access to global finance always

benefits all participant countries.

Two key Vodoo conceptions underlying the policy of the 2019-2023

EFF for Pakistan are “equilibrium” and “competition”. We will analyze

them below in brief detail.

C.3. Equilibrium
In October 1999, Gorden Richardson, then governor of the Bank of

England, said:
26
 I regret to say that I have little direct experience with economic
equilibrium. Indeed so far as I am aware none at all. Sometimes there
are suggestions that we will be moving towards equilibrium next year
or the year after but somehow this equilibrium remains (always) in the
offing (Euromoney, 1979).
According to the Vodoo conception, the economy arrives at a stable

conjecture automatically through market connection. This balance is

maintained ad infinitum and we can only conceive of steady static

growth paths. Time and turbulence are ruled out of the picture

(Blanchard, 2000). In the real world economic balance is necessarily a

transient phenomenon since economic variables necessarily overshoot or

undershoot their mythical “equilibrium” values.

Classical economists and their followers such as Sheikh (2016) and

van Dugeri(1983) conceive of equilibrium as a cyclical, self-repeating

gravitational force subject to turbulence and the values around which

economic variables are seen as gravitating are themselves conceived of

as moving averages over-determined by unpredictable technological,

economic and social changes. Moreover, in the determination of market

outcomes, supplier monopolization undauntedly plays an increasingly

important part in post-colonial times.

Vodoo conceptions of equilibrium see it occurring either instantly or

over very short period. Classical conceptions (“turbulent equilibrium”)

expect the adjustment process to take seven to eleven years during

which capacity utilization of individual industries are said to “adjust” to

the (moving) average capacity utilization rate of the economy as a

whole. This is the long run in which according to Keynes “we are all

dead”. It is particularly absurd to conceive of equilibrium –

27
instantaneous or turbulent – in financial markets which are driven by

(anything but rational) expectations and are forever subject to bubbles

and their bursting. It is recognized that expectations can affect

fundamentals and the fictitiously presumed gravitational anchors are

themselves path dependent (David, 2001). The Efficient Market

Hypothesis has been belied once for all by the 2008-2010 crises. The

dependence of fundamentals on actual outcomes in financial markets

has also invalidated the Rational Expectation Hypothesis. There is no

proof whatsoever of the time it takes for the ‘general rate of profit’ to act

as a gravitational force determining financial asset prices. Nor of course

is there any reason to believe that the assumed gravitational forces will

lead to the realization of “potential output” or full employment.

It is simply not the case that self-regulating markets generate

“potential” output and full employment or allocate resources efficiently

and equitably. It is also not the case that merely removing market

“imperfections” will enable capitalist markets to do so. Indeed enhanced

exposure to the inherently stagnating, crisis prone, politically vulnerable

global financial and commodity markets increase the inefficiency and

inequity of national market transactional structure. The East Asian

experience shows that the market needs to be governed not “liberated”.

As Dani Rodack has shown “there are no examples of countries that

have achieved growth following whole sale liberalization (Rodrik, 2001,

p. 7). Exposure to international finance enhances the vulnerability of

both the real exchange rate and domestic interest rates to short global

28
financial pressures and as the IMF itself has recognized “there is no

proof that financial liberalization has benefitted growth in developing

economies”.

Chasing mythical equilibrium states through subservience to global

markets (black cats in dark rooms which are not there) has been

mandated by the IMF for poor countries as it serves the interests of

global finance. It must be remembered that Wall Street and the City of

London have always loudly applauded an enhancement of IMF

resources. That is why within a year of the 1997 East Asian crisis,

Thailand, Malaysia and South Korea got themselves rid of IMF

programs. It is also the reason why the IMF had to brow beat (along

with other members of the Triad) the Greek government to disregard the

results of the anti-austerity referendum in 2015. But as an agency of the

US state department, the IMF has of course no power to resist the

systematic dismantling of the liberal global order by Trump in the

interests of American nationalism.

There is nothing automatic or “equilibrating” about the global

financial system as the crisis management strategies of the imperialist

countries in the 2008-2010 period has shown. Subjecting Pakistan to the

discipline of global financial markets is subordinating it to imperialist

hegemony – it is nothing else.

C.4. Competition
Competition for increased profit is necessarily antagonistic leading to

turbulent patterns and outcomes. It is of course never “perfect” and

outcomes so generated are of course never “optimal”. Even Frank

29
Knight noted that perfect competition “avoids any presumptions of

emulation or rivalry”(McNully, 1967). Price adjustment is always

achieved by visible not invisible hand. In the real world firms are always

price setters and all firms seek to grow as large as they can to reduce

costs. All market contesting firms are necessarily cost cutting, scale

expanding, and price setting entities. Competition leads to continuous

disorderly adjustments in price and output levels. Prices in all markets

fluctuate with respect to productivity. As productivity stagnates or falls

prices tend to rise. It is the technological capability and rising factor

productivity of a firm which enables it act as a price setter in all

competitive markets. Given our technological backwardness we will

necessarily be price takers (not price setters) in virtually all global

markets it we choose to integrate our production and financing

structures to those of capitalist metropolitan countries. This is simply

one aspect of imperialist subordination – our usury rate will be

determined in world finance markets, our exchange rate will be

determined by movements in world currency markets. “Perfection”

exists only in the imagination of the IMF and its sycophants.

Theories of monopoly capitalism have existed since Hilferding’s

times who said that “it is useless to search for a theory of monopoly

price”(Helferding, 1985, p. 270). Monopolies compete, sometimes

through price cuts, sometimes through other means. Price setting

capability of a firm – ability to impose a fluctuating mark upon

fluctuating unit costs differs from market to market – but in the global

30
markets (both commodity and finance) the “degree of monopoly

(Kalecki’s term) is never so low as to render it “perfectly competitive”.

The biggest firms are always price setters and although demand does

influence price setting in many global markets, demand structures are

often oligopolistic – a handful of major firms dominating. Prices in

monopolized markets are rigidly flexible – they are characterized by

administered pricing. Virtually all global markets are characterized by

the general prevalence of administered pricing. This is no in even those

global markets which are seen to be competitive (Lee, 1999).

Increased reliance on world trade and financial markets is

surrendering Pakistan’s sovereignty and subjecting our economy to the

monopolized competitive forces of global capital over which we have no

control.
C.5. Globalization
Neoliberal globalization became mainstream imperialist policy during

the last two decades of the twentieth century. All subsequent IMF

agendas have endorsed its main themes – lowering tariffs and NTBs,

eliminating subsidies, privatization global capital inflows and outflows,

privatization and flexiblising labor markets (i.e. destroying human

union). Many African and Latin American countries have submitted to

IMF surveillance and dictatorship and the results in the main have been

disastrous. In Latin America, for example, GDP per capita grew by a

total of 75 percent during 1960 to 1980 when these countries were

pursuing “statist” policies and by only 7 percent (with wide annual

fluctuations) during 1980 to 2000 when IMF dictates were implemented.

31
In Africa, during the period of IMF rule (1980-2000) GDP per capita fell

by 15 percent while it had grown by 34 percent during the past two

decades (Weishort, 2002). Strong export growth is usually a consequence

of discriminatory trade and industrial policy, exchange rate stability and

adroit price management. “Free” trade is only beneficial to a country if it

is experiencing productivity growth – fall in relative unit costs. The real

exchange rate is strongly influenced by real unit costs and unless

productivity increases depreciation of a country’s currency will not lead

to correction of payment imbalances. The IMF holds that depressing real

wages is the only route to enhanced global competitiveness. As the

African and Latin American experience has shown this is a manifestly

false doctrine – Sustainable growth in global and national

competitiveness requires factor productivity growth.

Globalization involves genocide (remember the Red Indian, the

Aborigines, Vietnam and Cambodia and the continuing American and

French slaughter in Afghanistan, Iraq, Syria, Mali, Senegal and many

other sub-Saharan countries), colonization, plague, slavery, targeted

destruction of competitors (in India and China) and a huge transfer of

wealth to Europe and America. Globalization is an ongoing war and we

continue to be murdered and looted through the manipulation of

transportation costs, tariff and NTB structures, trade and financing

policies articulated both within capitalist economies and across them.

The vision of “gentle commerce”, perfect markets and optimal

macroeconomic outcomes pedaled by the IMF justify this continuing

32
imperialist slaughter and pillage. The IMF advocated privatization,

abandonment of capital controls, flexiblisation of labor markets make

our economies easy prey for foreign control.

To counter the negative effects of globalization countries that have

achieved sustainable development (especially East Asia today Europe in

nineteenth century) have always relied on state investment through

import substitutions and industrialization, targeted protectionism,

productivity enhancing technological policies and promotion of

managerial capabilities. The focus of successful ‘dirigisme’ policies has

been on achieving absolute (not comparative) advantage through

productivity growth. Productivity growth is vitally important both for

enhanced competitiveness and for institutionalizing non-inflationary full

employment strategies – the words “productivity growth (leave alone

strategies for factor productivity enhancement) occur nowhere in the

IMF’s EFF program for 2019-2023. In an economy such as Pakistan,

productivity enhancement must be focused on the domestic economy –

not on international trade and financial transactions – since it is here that

outcomes are most amenable to policy initiatives and because

monopolistically determined price structures of global markets are

unlikely to reveal efficient strategies for increasing Pakistan’s absolute

cost advantages in its major spheres of production and exchange.

The health of the global economy is itself highly dependent on state

support. Thus between 2008-2010 total subsidies for crisis fighting in the

20 OECD countries amounted to $ 1.87 trillion counting only

33
discretionary expenditures (US over $750 billion, China about $ 340

billion, Japan $ 230 billion)(Tooze, 2018, p. 272).Globalization is not a

natural process. It is continuously shaped by American and now

Chinese businessmen, policy elites and politicians. The world is not

governed by market forces. The markets themselves need governance.

As the 2008-2010 crisis imploded this became crystal clear. Without

massive and sustained support by imperialist states, financial markets

would have collapsed catastrophically. The globalized economy is

politicized through and through. It is Greenopan who crafted

postmodern global financialization which is an artifact of deliberate

legislative and political construction designed to strengthen imperialist

hegemony. It is now being re-crafted by a paleoconservative (Trump) to

further strengthen the American grip over the world. There is nothing

that is natural or automatic about the functioning of the global financial

system. The massive extension of the Fed’s swap loans to Europe in the

aftermath of the crisis illustrates the essentialy political character of

global financial decision making. The IMF is aninstrument of American

financial diplomacy. The inherent crisis proneness of the global

financialization process requires a continuous intensification of

imperialist political efforts to attempt to salvage this sinking ship.

C.6. Openness
Trade liberalization, like financial liberalization, erodes national

sovereignty. This is amply demonstrated by the impact of the 2008 crisis

on East Asia. In the run up to thecrises the East African economies had

been puppets of the IMF. They had adopted tight monetary policies and
34
built up huge foreign currency reserves – South Korea’s foreign

exchange reserves amounted to $240 billion. For several years prior to

the crisis South Korea had been building itself on a regional financial

hub in East Africa. It had massively liberalized currency and capital

flows. The vulnerability came from the liability side of the balance sheets

of South Korean banks – many of which were targets of foreign

investment and deeply involved in wholesale transactions borrowing

short (at relatively low interest rates) and lending long at higher rates.

This short term borrowing was in global dollar markets. Korea’s export

success further fueled the appreciation of the Won. Korean

manufacturers (Choeloes) increased dollar financing of Korean

investment and repaying their creditors at favorable exchange rates. By

June 2008, the Choeloes had $176 billion as outstanding short term

liabilities. Bank short term liabilities amounted to $81 billion.

Then the short term lending markets collapsed and the dollar

appreciated massively. There was an immediate catastrophic collapse in

the exchange value of the Won which depreciated by 60 percent during

2008-2009. The cost for Korean borrowers for issuing dollar bonds

against default CCPS increased by over 300 percent in 2008. Banks were

effectively expelled from the REPO market.

During 2008-2009 Thai exports fell by 25 percent leading to a major

political crisis. South Korean exports also took a hit. To offset the decline

in dollar funding the South Korean government provided $130 billion in

foreign loan guarantees and other firms of support. The Bank of Korea

35
actively intervened in the currency markets to prop up the Won and US

Fed strongly supported this market intervention by negotiating a $ 30

billion swap loan in October 2008 – the swap loan was extended due to

American recognition that South Korea would not accept IMF tutelage.

It would rather start a political clash with its long term allies.

Providing state funded stimulus to offset crises has been standard

policy of imperialist governments. It should be remembered that during

2008 Trump strongly supported Obama’s bailout and rescue packages –

especially those extended to car companies in Detroit. On the other hand

imperialist governments have often deliberately engineered currency

crisis to achieve regime changes as the president of Venezuela and

Turkey and the prime minister of Malaysia have repeatedly asserted.

Emergent economies reliant on raw material and commodity exports

have suffered enormous setbacks –witness the fate of Brazil, Russia and

South Africa. All major ‘emergent’ economies have been under constant

fear of collapsing commodity prices (since 2014) and global interest rate

fluctuations. In 2016, even China experienced massive flight of capital as

hundreds of billions of dollars fled from China in search of safe haven

on a monthly basis.To stem this outflow the Chinese Central Bank

through massive market intervention stabilized the Yuan and capital

controls were rigorously imposed. A reduction in foreign exchange

reserves (from 4 trillion in 2016 to about $3 trillion in 2017) was

countered. This was accomplished by a large scale stimulus package and

a macroeconomic and industrial strategy to hasten domestic demand

36
and manage over capacity in key industries – the One Belt One Road

(OBOR) is a key component of this strategy. Despite this massive state

intervention, imperialist policy makers widely applauded Xi’s speeches

at the Davos forum in January 2017 and January 2018.

This shows that imperialist business elites and policymakers do not

subscribe to Vodoo doctrines – they pay no attention to these theories in

crisis management. Vodoo theory and the policy presumptions which

emanate from it are employed mainly as means for disciplining their

third world client states and depriving them of their hard won national

sovereignty.
C.7. Determination of Output, Employment, Investment and Profit
Now let us look at the macroeconomic dynamics underlying IMF

program projections. There are of course several IMF “occasional

papers” on the Pakistani economy but how they are used to generate the

macroeconomic values of key variables has not been made explicit in the

EFF documentation. However, the expected response to policy

initiatives undertaken by the Program is indicative of standard Vodoo

assumptions. This and the following sub sections will seek to assess the

validity of the theoretical paradigm underlying these projections.

We recognize that our approach in this assessment is not as realistic

as it ought to be. The micro-foundations of the IMF’s projections are

grounded in hedonistic utilitarianism – every consumer/producer/

policymaker compulsively seeks never-ending increase in

income/wealth/ capital accumulation. In Pakistan there are millions of

people (not all of them mustadafeen but also owners of halal businesses)
37
who regard ma’ash(economic life) as a means for achieving salvation in

the hereafter (ma’adh). This is the mass base of the Tehreek-e-Labbaik

and we are continuously mobilizing and institutionalizing it to combat

the systemic dominance of capitalist individuality and rationality. As

part of this struggle we will do our utmost to thwart the implementation

of the IMF policy agenda.

Nevertheless we also recognize that the systemic impact of the

Islamic struggle on the Pakistani economy remains weak and capitalist

rationality and individuality remains systemically dominant. It is

therefore realistic to ask whether the policymakers will achieve what the

IMF says they will achieve by following its policy agenda.

The process of determination of output and employment has been a

subject of debate among several economic schools – classical, Vodooists,

Marxists, Keynesians, post-Keynesians neo Vodooists etc. In the Vodoo

conception the aggregate supply curve is invariant to changes in

effective demand induced by fiscal or monetary initiatives. It is a vertical

straight line and its movement to the right depends on autonomous

technological “shocks” and on getting prices “right”. In the absence of

perfect markets it is impossible to tell what the “right” prices are. The

IMF contention is that the “right” prices (both commodity and factor)

are those with which imperialist markets and governments confront

Pakistan. Pakistan can realize its “potential” output only by abject

surrender to imperialist state policies and global monopolistic market

forces.

38
 Other schools – notably Keynesians and post-Keynesians – dispute

this version. In their view growth can be induced by fiscal and monetary

measures to stimulate aggregate demand. The Keynesian aggregate

supply curve is upward sloping to the right – it is not a vertical straight

line. The aggregate supply, aggregate demand “equilibrium” generated

by market forces may not necessarily lead to a full employment of labor

and capital – i.e. the realization of potential output. And even if an

“equilibrating” force is operational (as indicated by the Hicksian IS-LM

modification) it may take too long to fully work itself out and restore full

employment equilibrium.

In the Keynesian perception it is changes in output which adjusts

savings to investment levels. Here output is seen to be a positive

function of the rate of profit and a negative function of the rate of

interest. Investment is driven by profit expectations and the multiplier

mechanism. Raising investment (particularly state investment) is thus

crucially important for achieving “potential” output and growth. It is

also fueled by the creation of private and public purchasing power

(especially the growth of public debt).

In the classical (both neo-Ricardian and neo-Marxist) conception

maximum output growth is a function of the growth of profit. In neo-

Ricardian systems the maximum (optimal) growth rate is the maximum

profit rate revealed by the total absorption of surplus in new investment

and consumption. In Marx’s two sector model, the self-expanding

sustainable output growth rate is also seen as a consequence of the full

39
employment of surplus (i.e. excess of production value on cost of

production).

Profit is the excess of the value of output over cost including the cost

of finance. Interest payments are a deduction from profit and hence

variations in interest rates necessarily negatively effect profits. Hence

both profit and prices of production are determined by interest rates and

by the debt policies of investors (both private firms and government) –

the higher the net debt of a firm, the higher its corresponding price of

production). Monetary policy therefore influences not just interest rates

but also prices and the profit level. In the classical view profits are also

crucially influenced by the real and in the Keynesian view by the money

wage rate. Monetary policy initiatives are thus capable of both raising

profit levels and lowering costs of production (by reducing financing

costs). This is amply illustrated by the near zero rate policies of Europe

and America during the past two decades.

Investment is also influenced by bank lending policies – low reserve

to deposit ratio enhances bank lending. Increases in money supply (Mo,

M1, M2, M3) can also have output and investment enhancing impact.

Aggregate investment especially autonomous investment is also

heavily influenced by profit expectations. If expectations are depressed –

reflecting low anticipated profit rates – many genuine investment

opportunities will be missed and growth stifled. Firms and individuals

will hoard money and aggregate demand will be suppressed.

40
 Capacity utilization rates also respond to profit expectations and it is

investment (especially autonomous investment) which determines the

level and rate of output growth in both new-Keynesian and post-

classical perspectives. Savings are not independent of investment. This is

so because savings and investment are usually undertaken by the same

entities and financing out of retained earnings is becoming a dominant

feature of advanced financial systems. The saving decision passively

adapts to investment needs. In a typical capitalist economy savings is an

endogenous variable (Blecker, 1997). Normally, business savings and

investments are highly correlated and for an economy such as Pakistan

with low income levels it is particularly unrealistic to ignore this fact

and assume (as both Vodoo and orthodox Keynesians do) that savings

are done extensively by households.

C.8. Usury/Interest
Interest is the lifeblood of capitalism (Maududi, 1963, p. 24). Capital

typically valorizes itself through compound interest aggregation (usury)

and asset price speculation (gharar). In this sub-section we will critically

assess some theories of the determination of interest as well as theories

pertaining to the impact of interest rate changes on investment, profit

and prices.

As we have seen usury is a part of surplus (gross profit) – the

“pound of flesh” Shylock extracts. Almost all economic theorists agree

that there is no such thing as a natural rate of interest – so it should not

41
be treated as a cost of production (from the point of view of the economy

as a whole) but as a part of the surplus generated by capitalist

transactions. Usury rates have been described as “the price of

production of finance” (Pamico, 1988, p. 12) and the most efficient

producer of finance (the bank, the NBFI) with the lowest unit fixed and

transaction cost determines the market competitive usury rate. This

“competitive” loan usury rate regulates capital accumulation by serving

as a benchmark for the average “competitive” rate of profit. The

“competitive” usury rate is also the “competitive” profit rate of

banks/NBFIs. The (main) source of bank/NBFI profits is the making of

loans (and gharar transactions). Loan issue is however limited by the

reserve ratio which banks have to maintain. In the Vodoo perspective

the reserve rate is determined on the basis of the experiences of the most

efficient producer of the finance. Usury rates charged by banks are based

upon the “competitive” bank profit (difference between their usurious

and gharar earnings and their fixed and operating cost.

In the Vodoo perspective the interest rate ought to be entirely market

dependent – it is thus paradoxical that the IMF insists on forcing the

State Bank to raise its base rate. Both Vodoo and Keynesian economics

seem to regard the production of finance as a non-capitalist activity. In

their perspectives, the market rate of interest is determined by

preferences and expectations. Some post-Keynesians regard bank usury

rates as monopolistically determined arbitrary mark up on bank

transaction costs. Others (Rogers, 1989) says that the going usury rate is

42
purely conventional and has no basis in the capitalist transactional

system.

Recognizing the basis of usury structures in the profit maximizing

behavior of “producers of finance” should not of course obscure the vital

role of speculations in the determination of usury rates and gharar

(stocks and bonds) prices. As George Soros argues expectations effect

both actual financial prices and fundamentals but are also affected by

them (Soros, 2009). Typically it is sudden change in expectations which

transforms financial booms into bursts.

Usually the “competitive” market determined usury rate (or rather

the term structure of usury rates) will follow the profit rate – for usury is

a part of gross profit. There is of course does not guarantee that usurious

and gharar rates may not periodically exceed the “general” (average)

rate of profit in a capitalist economy given the important role of

expectations and monopolistic markup practices. Given this there is

simply no way to identify an optimal proportionality factor linking

gross profits to “competitive” usury/Gharar rates or the bank loan or

reserve rates. Usury rate structures are also impacted upon by the

general price level and the variations in the fixed and transactional costs

of “the producer of finance”. This relationship between usury rate

structures (the yield curve) and the price level illustrates that the

“competitive” usury rate structure is price variant and that there is no

such a thing as “a natural rate of interest” –almost all economic schools

agree on this point (McCullock, 1982). The term structure of usury rates

43
is determined by the “turbulent equalization” of profit rates among

“producers of finance”. In the Vodoo (and the classical) perspective the

base interest rate is also seen as being determined by market

competition. Assessments of risks associated with expectations thus play

a crucial role in the determination of both base usury rates and the yield

curve.

The non-efficiency of financial markets has been illustrated by the

vigorously erratic movements of usury and gharar rates over long time

periods – variations which reflect the predominance of irrational

expectations in their determination (Shaikh, 2016, figure 10.8). Even

assorting a direction of causation between usury and profit is

problematic for in a capitalist economy causation runs both ways – that

is why Sarrafa argues that “the profit rate (is) determined by the interest

rate set by the Bank of England or the stock exchange” (1960, p. 33).

Similarly the structure of usury rates has a bidirectional causation

relationship with the demand for aggregate (real) output and credit

demand. Without taking account of this bi-directional relationship

between usury/gharar rates, profit, prices and expectations the simple

minded Vodoo/IMF message is that the central bank will follow the

market in the determination of the base rate. In the post-Keynesian view,

while the central bank (should) arbitrarily determine the base rate the

term structure of usury rates should be allowed to be determined (on the

basis of the base rate) by the commercial banking system on the basis of

the arbitrarily determined profit margins. Post-Keynesians see no

44
objective basis for the determination for the base usury rate or for the

structure of interest rates (Wray, 1990). It is thus abundantly clear that

there is no “natural usury rate” even in a capitalist economy.

Which market should the state bank follow in determining the base

rate? In the Vodoo/IMF view it is of course the international market,

highly monopolized and overwhelmed by arbitrary speculation and

reflecting changes fundamentals of these metropolitan imperialist

countries – Pakistan is almost an invisible player here and changes in

Pakistani fundamentals play no role at all in effecting global usury and

gharar rates. Tying the base rate to imperialist market rates is an

effective means of abandoning even the base rate as policy instrument. It

amounts to committing financial suicide. There is ample empirical proof

that financial liberalization has seriously hurt poor countries (Prassad et

al, 2002).

Rigorous capital controls are also required to maintain the desired

base rate for current account deficits put pressure on interest rate

structures would only be effectively countered by the imposition of

capital controls – as the Chinese experience of 2016/17 has shown.

Depreciation of national currencies as response to imperialist market

trends is also a major cause of usury structure vulnerability.

Post-Keynesian recognize that market determined usury rate

structures are pro-cyclical. Expectations play a key role in capitalist

markets. A fear of financial distress triggers a flight of capital from

financial to real assets, thus driving up the market usury rates precisely

45
at a time when their lowering is desirable. Crisis proneness of the

financial system of course increases with the endogenisation of money

supply – reserve money (M0) is usually a small and falling component of

monetary assets (M3). The IMF recommendation to drastically limit the

issuance of reserve money is a recommendation for increasing the crisis

proness of the Pakistani financial system and enhancing its vulnerability

to international market shocks and disturbances. This also makes clear

the fact that determination of usury rate structures is influenced by

forces of the demand and supply of loanable funds.

Interest rate increases are expected to impact negatively on

investment – the more the global Shylocks takes away from the gross

profit of Pakistani business the less the incentive to plough in new

money (given capitalist rationality). Pamico (1988) has shown how

reducing M0 and raising the base rate would not only jack up the interest

rate structure and the price (level, as liquidity discount vary) it would

also lower the real wage rate – so that restrictive monetary policy

imposes a wage loss on the mustadafeen.

Jacking up interest rate structures is expected by the IMF to have a

positive impact on the rate of profit – due to it negative impact on real

wages. But if firms are heavily leveraged and have low ROA ratios – as

is the case with regard to Pakistan’s textile and national chemical sector

firms for such forms even the prime rate changed by banks on

investment accounts may easily exceed the gross profit rate – interest

rate increases will lead to bankruptcies and plant closure and massive

46
unemployment. Since no such thing as a natural usury rate exists, the

IMF’s recommendation of linking domestic usury structures to

capricious global market rates may in Pakistan may well have a negative

impact on both aggregate and average profitability. Even in “normal”

times and circumstances it is impossible to determine the “right”

proportionality of the usury rate to the gross profit rate.

Emergent economies in general have avoided following restrictive

monetary policies – thus Malaysia lowered the central bank usury rate in

the wake of the 1997 crisis and embarked on a very liberal lending policy

for Malaysian Development Berhad (IMDB). The Bank of South Korea

responded to this crisis by offering low cost foreign loan guarantees

worth $100 billion. The Korean government offered a further $50 billion

in liquidity backstops. The Fed’s $50 billion swap loan extended to

South Korea further enhanced liquidity.

The American Fed has stuck to a low usury policy for 37 years –

since Greenspan took office in 1982. Its minuscule usury rate increase

during 2012-13 generated a “taper tantrum” throughout the capitalist

world but has proved to be nothing more than “crying wolf”. Usury

rates have been staying put in 2019 and the American president is

screaming for their reduction. Everyone knows that a significant rise in

the base rate will strangle the sickly global economic recovery that in

2019 is performing out in any case. During the “taper tantrum” of 2013-

2016 there were frequent calls from Brazil, Indonesia, even China that

the Fed should take account of the likely global impact of its interest rate

47
policy. But of course the Fed is not a global central bank. It is a national

central bank answerable to national political institutions – also it is a

Master not the Slave of the IMF. IMF recommendations are the subject of

j in Fed offices.

The vulnerability of emergent markets’ financial systems to the

usury shocks emanating from the Fed was graphically demonstrated

during the taper tantrum year. What Morgan Stanley calls the fragile

five economies – Brazil, India, Indonesia, South Africa and Turkey – are

particularly vulnerable to global usury rate shocks – market usury rates

were jacked up on a defensive measure in countries due to actual and

anticipated global bond yields but they were also accompanied by the

implementation of rigorous capital controls. Paradoxically contradictory

to the IMF mantra, emergent markets with the strongest fundamentals

and the most “efficient” financial systems (attracting billions of foreign

capital inflows) suffered the greatest vulnerability so that talk of

“building up of tremendous distortions in interest rates” was common

not just in emergent markets but in America itself where the relationship

between the Fed and leading market firms was seen to “increasingly

resemble the contorted psycho drama of a risky marriage” – a marriage

built on shaky foundations. At any moment the balance might be upset

by a single policy shift or a market mood change. The consequences for

the entire global economy may be deeply unpredictable (Tovre, 2018,

481-82).

48
 Seeking refuge in swap arrangements was a typical response to fears

of the slowdown of quantitative easing and the raising of interest rates

by the Fed. In September 2013, India negotiated an increase in its swap

loan arrangements from $10 billion to $15 billion from Japan. In

December that year, Singapore, Thailand and Malaysia sought enhanced

swap arrangements with Japan. Swap levels extension was seen as

crucial to the growth stimulus effort. No “emergent economy of East

Asia went begging bowl in hand to the IMF.

The IMF did it not object to the pursuit of a lax monetary policy –

usury rate suppression easing quantitative extension of swaps by the

metropolitan capitalist countries or in the leading emergent economies

in the post 2008 period. In 2016-17 it applauded the imposition of capital

controls, the huge credit expansion and the maintenance of a new fixed

exchange rate for the year by the Chinese government. In the eyes of the

IMF never ending pursuit of a tight monetary policy is a recipe only for

poor indebted countries for it ensures that this continue to enable them

to supply Shylock with his pound of flesh. Central bank ‘independence’

is also strictly for poor indebted countries as the Creating Opportunities

for Investors, Consumers and Entrepreneurs (Choice)Act of 2018 in the

US has shown. This represents a significant dilution of the Dodd Frank

legislation. The Choice Act is an all-outattack on the Fed’s autonomy

and independence. Under the Act the US legislature demands total

transparency of all Fed deliberations. It requires the Fed’s monitoring

committees (FOMC) to declare a mathematical rule to justify its usury

49
rate changes. Trump’s continued pressure on the Fed to reduce usury

rates is indicative of the US government’s desire to totally subordinate

the Fed to the legislature and the executive.

“Independent” central banks are of course not independent at all.

They are the tools used by global usury markets and imperialist

governments to subject poor countries’ governments to subordinate

their economies to the interests of imperialist forces. The monetary

policy they articulate has the specific purpose of shoring up of the

imperialist system.
C.9. Exchange Rates
Stable nominal exchange rates are essential for export success (Agorn

and Thssee 1983). The “free market” has not been allowed to determine

the exchange value of their currencies by Japan, South Korea, Taiwan,

China and Malaysia during their periods of rigorous export growth.

Financial liberalization leaves the real exchange rate at the mercy of

fickle short term capital movements. Even minuscule movements in

trade and capital flows can produce enormous unmanageable swings in

the real exchange rate. As Saraffa has shown changes in the (intentional)

relative prices of goods necessarily effect the relative costs of producing

these goods. Hence comparative costs need not change in the “right”

direction in response to changes into real exchange rates. Domestic

productivity growth may not be responsive to real exchange rate

variation. Moreover real exchange rate changes are responsive both to

movements in the trade balance and the balance on the capital account.

50
If they move in opposite direction movements in the real exchange rate

as well as its macroeconomic impact becomes indeterminate.

With flexible (floating or managed) exchange rates national

producers are forever confronted with arbitrary changes in their costs

and prices in response to a constantly fluctuating exchange rate.

National producers must continuously adjust their prices to remain

competitive in global, national markets as the dollar values of exports

and imports of international reserves and obligations changes from

moment to moment. Moreover, in the case of an economy such as

Pakistan, which is a miniscule player in global commodity, service and

finance markets, variation in the “free” international valuation of its

currency has no relation whatsoever to changes in domestic

productivity. There is simply no natural relationship between national

cost/price structures and a freely determined exchanged rate value of the

Rupee.

Purchasing power parity (PPP) theory on which Vodoo exchange

rate theory is based in principle untestable because it assumes that the

basketof consumer goods on the basis of which the estimates are

constructed is the same in Pakistan as in its major trading partners

(America, the EU, and the Gulf countries). It also assumes that the

tradable to non-tradable price ratio is the same in Pakistan, America, the

EU and Saudi Arabia and the UAE. These are manifestly absurd

assumptions. Real exchange rate estimations are subject to very wide

“spectaculative” fluctuation over both the short and the long run (Issard,

51
1995). This fluctuation is exacerbated because “free” or exchange rate

variations stimulate short capital flight. This can have a disastrous

impact on investment growth as it enhances both uncertainty and risk of

putting in new money.

The real exchange rate is effected by its fundamentals productivity

growth within national economy (to which the IMF pays no attention at

all in its recommendations) autonomous capital flow and the difference

between the domestic usury rates and a average of trade and investor

partner usury rates. While national productivity growth and price level

may be amenable to national policy initiatives, control is surrendered to

imperialism where averages of global interest rates and commodity

prices are taken as a benchmark. Since the composition of the Pakistani

price index is significantly different from that of its major trading

partners, changes in the real exchange rate does not reflect changes in

productivity levels within the national economy. Short term capital

movements trigger real exchange rate movement and as Harrod pointed

out more than sixty years ago, macroeconomic policy “adjustments” in

response to real exchange rate variation may not reflect changes in the

competition of the natural price indices or productivity growth

variations in global and (globally determined) national usury rates and

structures also exacerbate real exchange rates. Association of changes in

the real exchange rate and labor productivity growth are extremely

weak (Shaikh, 2016, p. 530-53). Real effective exchange rate variations

are also caused by equity return differences between Pakistan and our

52
major trading partners – this was graphically illustrated by the ten

percent devaluation of the Indian Rupee during the “taper tantrum”

period (2011-14).

Even if the Law of One Price (LOP) held at the individual

commodity level Purchasing Power Parity at the aggregate level is

necessarily violated because of the difference in the composition of the

price basket and the ratio of tradable to non-tradable between Pakistan

and her major trading partners. Variation in the real effective exchange

rates is thus unlikely to be even an approximate measure of productivity

growth of the Pakistani economy.

The impact of national productivity growth on the real exchange rate

is unidirectional. Changes in national productivity growth lower

national costs of production (the leading example is that of China) thus

affecting the real exchange rate. But there is no evidence to show that

changes in the real exchange of enhances productivity growth.

Nevertheless, unidirectional relationship between the real exchange rate

and domestic cost structures illustrates that changes in the real exchange

rate are rarely sufficient to connect correct balance of payment

imbalances. Devaluation will not itself eliminate trade imbalances –

especially in the case of Pakistan where the elasticity of the global

demand for its exports is low. Exports have remained stagnant despite a

near fifty percent devaluation of the Pakistani rupee during 2018-20. The

near universal experience of most poor countries forced by the IMF to

devalue has increased dependence on foreign debt capital. Depreciation

53
of the exchange rate in the case of Pakistan reflects an increase in

economic distress not an improvement in global competitiveness.

Depressing real wages through devaluation tantamount to imposing the

cost of adjusting the Pakistani economy in the interest of the imperialist

capital markets on the mustadafeen and mukhlaseen-e-deen in Pakistan.

The massive devaluation that occurred in the wake of the 2008 crisis

in East Asia – between mid-2008 and mid-2009 when the Korean Won

depreciated by 60 percent was countered by the imposition of strict

capital controls, the injection of dollar liquidity and the desperate

negotiation of swap loans with Japan and the Fed by the crisis stricken

East Asian governments. China fixed its exchange rate in 1994 and since

then has been pursuing a strict managed exchange rate policy tolerating

only miniscule adjustments in the value of the Yuan despite immense

American pressure.

When the taper tantrum hit the Turkish economy in July 2013,

Turkish president Tayyib Erdogan was in no doubt at all that the

political turmoil it caused was a result of an international conspiracy – a

conspiracy by foreign forces, bankers and international and local media

outlets – long seeking regime change. Erdogan discussed the connection

between Turkish private banks, international financial groups, Silicon

Valley ruled social media (‘the internet lobby’) and Israel (Financial

Times, 2013). The prime minister of Malaysia and the finance ministers

of Indonesia and Brazil were in those days voicing similar concerns (in a

low key) and demanding ‘clarification’ from the Fed as was China.

54
 As Theresa Mar the British prime minister said in October 2016, “if

you believe you are a citizen of the world you are a citizen of nowhere,

you don’t understand citizenship” (The Times, 2016). The myth of

“global citizenship is popularized by the agents of imperialism to

legitimate a devaluation of citizenship rights and to transfer national

sovereignty to global capital markets and imperialist armed forces.

Maintaining national exchange rate stability over long periods of time

through the imposition of rigorous capital controls and a targeted

balance of trade policy is an essential weapon for safeguarding national

sovereignty. The 2016 downturn in the Chinese economy and the

associated financial sector imbalances were checked by the Chinese

government’s successful intervention to prevent a further slide in the

value of the Yuan, through the establishment of a new peg, the

imposition of state capital controls and 20 percent reduction in China’s

dollar reserves.
C.10. Taxation and Fiscal Policy
In capitalist countries the government (local, provincial, federal)

enjoys a monopoly over taxation. Taxation is distasteful for the general

public because in most capitalist economies for most of the time it is a

means for transferring resources from the poor and the mustadafeen to

capitalist elites who do everything in their power to resist and avoid

taxation of their own resources. Capitalist governments therefore have a

built in incentive for increasing “deficit financing” (the printing of fiat

money and increased borrowing). Monetizing the public debt is a usual

tactic employed by capitalist governments to stimulate the economy –

55
and avoid taxation increases. Since May 2009, the US Fed has poured

trillions of dollars into the financial system in this manner. This

continued reliance of capitalist governments on borrowings and ‘deficit

financing’ reflects the limits on taxable capacity that are very quickly

approached in capitalist fiscal and financial systems. Trump’s highly

popular cutting of (corporate) taxes in 2017-18 shows that even in

America national taxable capacity is being exhausted.

The IMF suggests that monetizing the public debt will necessarily

fuel inflation – this is blatantly false especially in Pakistan where

inflation in supply side phenomenon the post 2009 experiences of the

United States, the EU and Japan Shows that during the last decade

despite massive public debt monetization inflation has been avoided by

a suppression of real wages. But authors of the “Modern Charterlist

Schools” argue that expanding government expenditure need not lead to

inflation or declining real wages. In their view if the government directly

employs all the labor the private sector cannot at a fixed money wage –

the state acting as an employer of the last resort (ELR) – it could ensue

both full employment and price stability. Further there is no evidence in

the case of the Pakistani economy of public investment “crowding out”

private investment. Quite the contrary, the elasticity of private to public

investment in Pakistan is significantly private and relatively high (Zaidi,

2009).

Historically, increased taxes have been a means for reducing effective

demand of the poor and the mustadafeen, not of the rich elites and

56
corporations. Contrary to IMF advice, Bell (2000) suggests that reducing

commercial – rather than central bank – borrowing by the government

can have a stabilizing effect on the economy as it reduces bank reserves

and supposedly induces a downward revision of the usury rate

structures. Monetizing the public debt can be a means for ensuring full

employment and stability of prices provided that the State Bank acts as

an accommodative agency of the state – and not as a hireling of

imperialist financial markets.

The IMF conception of “responsible” fiscal management is rooted in

a vision of globally integrated perfectly competitive markets which

almost instantly adjust producing full employment and stable price and

usury structures as government interference. In money and credit

creation, price determination and trade protection is reduced. The IMF

knows very well that this vision is an idiot’s dream but it continues to

propagandize this narrative in order to conceal the vicious competition

and the arbitrary political determination of market outputs that is

routinely generated by global capitalist functionings. Immiserising the

mustadafeen in countries such as Pakistan is a sought after objective of

imperialist sponsored fiscal management strategy.

Reducing budget deficit measures has historically laid the burden of

fiscal adjustment on the poor and the mustadafeen. Both increased

indirect taxation and reduced public expenditure have been employed

to achieve this purpose the “Laffer Curve” myth – that lower tax rates

yield greater aggregate revenue – is of course nonsense. “Expanding the

57
tax base” is a means for torturing the mustadafeen, especially small

businesses making the living of halal rizq more and more difficult. The

collapse of small businesses generated by tax base widening inducing

measures clear the ground for increased monopolization of the economy

by multinational corporations, global finance and big businesses.

Cutting back public expenditure during an economic slowdown is

asking for trouble. Government spending plays a major role in speeding

up recovery. The most positive impact of public funding on economic

growth is realized when the government directly employs people in the

manufacturing and the public service sectors – as the experience of the

US in the past Great Depression and that of Britain during 1945-51 has

shown. Expanding military expenditure – provided it is domestically

integrated and not predominantly externally sourced – has also been a

major historical stimulant. During 1943-1945 the American budget

deficit averaged 25 percent of GDP and the economy grew strongly.

The experience of the post 2008 period is that when government

expenditure was directed toward banks and corporations, this did not

adequately influence growth of investment and output. These funds

have usually been sequestered. Banks have used them to pay off debts,

build up portfolios and corporations have held on to them as safe

hoards. When the government directly provided employment (Britain

1945, America 1934-37) consumer spending boomed and the economy

was stablised.

58
 The IMF is ideologically based against public employment growth.

Such programs are essential for stimulating labor productivity growth

especially through the channeling of public investment in technology

intensive ‘capital goods’ enterprises. It is significant that the words

‘productivity growth’ do not occur in the IMF’s EFF 2019-23

documentation. This is because as the experience of most poor countries

shows productivity growth occurs over very long periods and in any

case as immersing – i.e. real wage depressing – process. Especially in a

war economy the government must govern the market to stimulate both

productivity and profitability. This is also true in times of economic

slowdown. During the 2008-10 period, tax rates were cut in Indonesia

and government revenue fell despite this public budget deficit rose. In

Malaysia in spring 2019 a government stimulus of $1.4 billion was

provided for the economy. This stimulus included both tax cuts and the

provision of credit guarantees. In October 2008 the South Korean

government provided a $50 billion fund for restructuring non-

performing loans and a $31.3 billion bond market stabilization fund. The

government launched a gigantic $94 billion construction program for the

period 2009-13 including large investments in nuclear power, the

railways system and the $15 billion for Four Major Rivers Restoration

Project.

The London G20 meeting of 2010 estimated that a total of $5 trillion

stimulus spending was required to offset the economic downturn.

During 2008-10 a total $10.9 trillion was spent through discretionary

59
spending and tax measures in the 20 OECD countries – Brazil spent

nearly $30 billion in its 2008-10 stimulus package, India over $25 billion,

Indonesia $12 billion, Saudi Arabia $45 billion and China $340 billion

(IMF, 2010). Asian countries share of global stimulus spending during

2008-10 was estimated at about a third (31.8%) of the total.

The periodic QE measures of US and European central banks

provided strong fiscal stimulus to these economies. Trump is also an

enthusiastic tax cutter and the Troubled Asset Relief (TARP) program

initiated by Obama remains effectively operative under Trump. The US

Fed has been mandated since the time of Jimmy Carter to achieve full

employment and it is in pursuit of this target that the Fed balance sheet

expanded to $4.6 trillion in 2010. QEs are designed to achieve this

purpose. The American deficit contrr to balloon in the Trump years. The

tax cuts of 2017 and 2018 threaten to add $1.5 trillion to the national debt

since the anticipated expenditure cuts following the tax cuts have not

been instituted. American public debt will also soar because Trump

plans to increase expenditure in the army and the navy. He plans to

spend an estimated $700 billion for this purpose during 2017-2027. His

tax cuts mean that the federal tax share of American GDP could fall to 17

percent. The total stimulus for military expansion during 2017-27 is

expected to be $104 trillion.

In 2016 China also launched a massive fiscal stimulus and credit

expansion programs to stave off a crisis in domestic demand.

Interestingly the Davos meeting – and the IMF representative at this

60
meeting – in 2017 loudly applauded China’s stimulus providing

initiatives as being extended to stave off another global economic

downturn. It is certain that as the US-China trade war heats up the

Chinese government will resort to massive fiscal injections into the

economy to stimulate domestic demand.

Integrating into a slowly stagnating financially vulnerable and crisis

prone global economy is highly risky for poor countries. Even Brazil,

Russia, South Africa and Turkey have suffered major shocks from the

post 2008 upheavals in global financial and commodity markets – oil

exporters have been particularly hard hit, global shocks transmit

suddenly and unexpectedly. Global integration produces sudden

ruptures that cannot be anticipated or forecast and which are deeply

complex. Many such rupublics demand urgent policy mediations but as

the level of global integration of a small poor economy increases, its

policymakers’ ability to respond to global shocks is methodically

reduced. The global economy is a social formation, overwhelmingly

dominated by the political, economic and technological forces of global

capital. Integrating poor countries to this malicious, malevolent and

malfunctioning network is a means for depriving them of their national

sovereignty and making them subservient to capitalist imperialism.

Breaking free of this imperialist stranglehold is both possible and

necessary for Pakistan.

61
D. the IMF’s EFF (2019-23) Program
The eclectic critique of Vodoo theory presented in the section C

enables us to identify assumptions underlying the current EFF.

D.1. Assumptions of the EFF
1. The global economy will not experience slowdown or

stagnation during the Program period or in its (at least)

immediate aftermath.

2. Global markets – commodity, financial and services – continue

to function perfectly or at least that the price and output

structures generated by the functioning of global markets

strictly mimics of non-existent theoretically assumed perfect

markets.

3. Market and macroeconomic “equilibrium” are stable over time

and/or on a steady state growth path – it is not a turbulent,

violent, unpredictable never-ending process that provides no

basis for the articulation of policies that require augmentation

of national sovereignty.

4. Capitalist competition is a gentle, law and reason governed

process, not a vicious dog eat dog struggle for slaughtering the

weak and accentuating monopolistic market control.

5. Capitalist (utility/profit maximization) individuality is

universally dominant and capitalist rationality universally

valid.

6. The ongoing struggle to subject the global economic order to

American national order – the struggle between neoliberalism

62
 and paleoconservatism – will not affect its existing systems of

market governance and organization.

7. Economic wellbeing is served by the marketization of social

order.

8. Marketization of society requires a de-sovereignization of

states (except America) by subjecting them to the will (political

and financial) of capital and by increasing their surveillance

capacity to monitor, punish, frustrate and inhibit social and

economic practices which seek to circumvent imperialist

hegemony.

9. Regulatory processes designed to achieve state de-

sovereignization will not be subject to capture by social forces

that resist national state de-sovereignization.

10. The implementation of state de-sovereignization policies is

compatible with the flourishing of democracy (especially at the

local level) in subordinated states.

11. By adopting neoliberal policies de-sovereignised states will

automatically absorb all shocks emanating from autonomous

changes in imperialist political strategies and global financial

and commodity market contigencies.

12. The tax capability of most poor states (especially Pakistan) has

been grossly under exploited during the “pre-reform” period.

13. Tax revenues from poor economies will not be channeled to

meet the credit needs of major global market players.

63
14. Foreign debt (and associated debt service payments) of poor

countries is not continuingly increased due to the pressure and

operations of global capital and money markets.

15. Retaining and strengthening domestic and global creditor

confidence should be the prime determinant of de-

sovereignizing state macro policy.

16. Processes of price setting in global bond, loan and currency

markets are competitive mimicking “perfect” market practices.

The domination of financial markets by a handful of secretive

oligopolistic conglomerations does not distort “perfectly”

competitive price structures.

17. Policies for improving debt servicing capability will necessarily

have a positive impact on GDP growth.

18. There exists a “representative” individual who aggregates the

supply and demand responses of all economic agents so that

the macro economy is solidly grounded on hedonistic

utilitarian micro foundations.

19. Autonomous changes in money demand do not impact

positively on output growth but only lead to an increase in the

price level.

20. Expectations are “rational” adequately forecastable and based

on (near) perfect knowledge implying that market related

information is a free good.

64
21. Capital and money markets function “efficiently” and the

shock adjustment period is instantaneous or at least very short.

22. System endogenous adjustment of interest rate structure (the

central bank basic rate) following market trends is sufficient to

quickly restore full employment and realise potential output.

23. Capitalist crises are always caused by “government failure” to

submit to market discipline and that these crises are self-

correcting – anti-cyclical policy measures worsens these crises.

24. Inflation is necessarily a demand side phenomenon.

25. Free trade and state unimpeded access to financial markets

benefits all participating countries at all times.

26. Allowing markets to function freely will produce steady state

growth and economic variables will in the short run not

overshoot or undershoot their “equilibrium” value.

27. Monopolistic/oligopolistic domination of markets does not lead

to a systemic distancing of prices from their potentialy

competitive values even in the short run.

28. Financial markets are driven by rational expectations - financial

markets are “efficient” in that they generate mimicked

competitive prices.

29. The operation of free commodity and financial markets

automatically generates the realization of potential output and

full employment equilibrium and allocates reserves both

efficiently and equitably.

65
30. Increasing exposure to global financial and commodity

markets enhances the efficiency and equity of national market

transactions.

31. The episodic dismantling of global trade and financial systems

by the Trump administration (and the retaliatory responses of

China and the EU) make no difference to the efficiency and

equity of the operation of the markets nor does it reduce the

benefit of integrating with them in the national economies of

poor countries.

32. Competition does not lead to continuous disorderly

fluctuations in prices.

33. Increase in factor productivity of a firm does not affect its price

setting capability in competitive markets.

34. Arbitrary monopolistic markup is not added to prices.

35. Demand structures in global markets are not oligopolistic with

a few major buyers dominating and prices are never

“administered”.

36. Sustainable export growth does not require successful import

substitution and the practice of targeted, discriminatory trade

and exchange rate policies.

37. Depressing national real wages is the only way to stimulate

productivity growth and thus achieve enhanced

competitiveness in global markets.

66
38. Globalization does not require a continuation of the massacre,

slaughter and genocide that has characterized its history – Red

Indians, Vietnam, Afghanistan, Syria, Iraq, Palestine,

Nicaragua, Libya, Mali – destruction of the power of non-

metropolitan countries and transfer of economic resources

from them to capitalist centers (Europe, America, China)

through unequal exchange mechanisms.

39. State policies designed to promote import substituting

industrialization, targeted protection and technological and

managerial skill upgrade induce productivity growth and

market competitiveness are harmful.

40. The growth and stability of the global economy is not highly

dependent on (and vulnerable to) changes in the policies of the

metropolitan countries (especially America and China). The

globalized world is ruled by markets not by imperialist

governments. The globalized economy is not politicized.

41. Globalization is not an artifact of legislation and political

construction deliberately crafted to serve the interests of the

imperialist countries.

42. The IMF is not an instrument of global financial diplomacy –a

sub-office of the US State Department.

43. Trade and financial liberalization does not erode the national

sovereignty and does not increase vulnerability to export

67
 demand downturns, import price escalations and foreign

exchange and interest rate shocks.

44. State subsidization and support is not necessary for

overcoming crises and extension of global swap loans have not

deliberately been extended by American and Japan to bolster

up the state support effort in emergent economies.

45. It is not the standard policy of all capitalist governments to

heavily intervene in markets to stave of recurrent capitalist

crises.

46. The economic success of ‘open’ poor economies is not highly

vulnerable to commodity price shocks.

47. Financial liberalisation and dependence on global interest rates

does not lead to massive capital flight from poor countries.

48. The IMF has not supported state intervention in markets and

imposition of capital controls by China, South Korea, Brazil,

Malaysia and Indonesia in the wake of the 2008 crises and in

2017 and 2018.

49. Vodoo theoretical and policy programs are not employed

principally by imperialism to justify victimization of poor

countries. They do not provide a basis for contra cyclical

management policies adopted by the imperialist countries

themselves.

50. The aggregate supply curve is invariant to changes in money

demand. The movement of the aggregate supply curve to the

68
 right is determined by autonomous technological changes and

polices that “get prices right”. Autonomous money demand

expansion leads only to pressure on prices.

51. The “right prices” are those with which imperialist financial

and commodity markets confront poor countries.

52. “Stability” can only be achieved in poor countries by

submitting to the discipline of global markets and the

imperialist policymakers who dominate these markets.

53. Market determined ‘equilibrium’ generated by the pure

interaction of market forces generates full employment and

potential output levels. Market disequilibrium are quickly

corrected by the independent movements of aggregate supply

and demand which ensure a recovery of full employment/

potential output in an unspecified “short run”.

54. Autonomous – especially state – investment growth cannot

cause realization of potential output.

55. Interest rates are not see a cost of production, monetary policy

initiatives (lowering interest rates) cannot stimulate an increase

in profits and or influence prices.

56. The impact of rising debt (both public and private) on profits

and prices is also ignored.

57. Role of expectations in influencing investment and hoarding

decisions is also ignored.

69
58. Saving always “adjusts” to investment and the saving rates

does not depend on investment. The relationship between

savings and investment is unidirectional not bidirectional.

59. Savings are undertaken mainly by households – and not

primarily by the government or the corporate sectors.

60. The central bank base rate should follow the market loan and

deposit rate trends. These are determined by the difference

between the usury/gharar earnings of banks and their cost of

production of finance. The reserve ratio – the ratio of reserves

to deposits – and the loan ratio – the ratio of loans to deposits –

should also be set by the banks (not the central banks) on the

basis of the average profitability of the banking sector.

61. The production of finance is a non-capitalist activity.

62. Monopolistic tendencies do not affect interest/deposit/loan rate

setting policies of the banking sector.

63. The role of expectations and speculation in the setting of usury

and gharar (stocks and bonds) transactions is ignored as is the

relationship between expectations and market fundamentals.

64. The possibility of usury/ghararrates overshooting profit rates

(due to monopolistic pricing of finance or ‘rational

expectations’) is not recognized. This may lead to large scale

bankruptcies.

65. Bidirectional causality in the determination of interest and

profit rates is not recognized nor is the bidirectional causation

70
 relationship between the structure of usury rates with

aggregate demand or credit demand recognized.

66. The State Bank should follow the highly monopolized

speculation ridden driven by metropolitan

marketfundamental, global markets(in which Pakistan is

almost invisible) in setting the Pakistani ‘base rates’.

67. In the case of Pakistan capital controls are not required to

reduce the balance of payments deficits.

68. Market determined usury rate fluctuations can never be pro-

cyclical.

69. While M1, and M3 are endogenous MO is exogenously

determined by the State Bank.

70. There is no recognition of the impact of usury rate increases on

the real wage rate – especially the highly negative impact of

restricting MO growth on real wages. It can also negatively

impact upon employment growth.

71. The IMF model provides no justification of the fact that

emergent economies have generally avoided following

restrictionist monetary policies as has America and the EU and

there is a global consensus that raising of interest rates will

lead to a petering out of the sluggish global recovery that

occurred in 2016/2017.

72. That the US Fed takes account of the impacts of its monetary

policy changes on the economies of the poor countries.

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73. That contrary to the experience of the major emergent

economies which suffered the greatest shocks during 2008-2010

and (anticipated) shocks during 2013-16 strengthening

financial systems will reduce global financial vulnerability.

74. The talk of “building up distortions in interest rate structures”

was not common in both metropolitan and emergent markets

during 2013-16.

75. The relationship between the Fed and major global market

players does not reflect a “rocky marriage” – a marriage built

upon shaking foundations subject to unpredictable policy and

market mood shocks.

76. Swap arrangements have not been widely used by emergent

markets as defensive mechanisms for warding off global

financial shocks.

77. No explanation is offered for the fact that the IMFdid not object

to the pursuit of a lax monetary policy – QE, interest rate

suppression, extension of subsidies, imposition of capital

controls during 2008-2019 by metropolitan and emergent

economies countries.

78. The imposition of restrictionist monetary policy is essentially a

means for enabling poor countries to continue to give Shylock

his pound of flesh and that the associated talk of “structural

change” is merely a false cover for this.

72
79. The proposed enhancement of the ‘independence’ of the State

Bank is anything other than an attempt to subordinate it to

international capital and money markets and the decision of

the Fed.

80. Stable nominal exchange rates are not required for export

success.

81. State management of exchange rate has not been standard

policy in emergent economies during periods of rapid export

growth.

82. Liberalization does not leave the real exchange rate at the

mercy of volatile short term capital movements.

83. There is no necessary link between changes in real exchange

rates and changes in comparative costs.

84. Domestic cost structures always change in the “right”

directions in response to changes in the real exchange rates.

Price/ wage ‘stickiness’ does not exist.

85. Domestic productivity growth is always responsive to changes

in real exchange rates.

86. The macro-economic impact of real exchange rate changes is

never indeterminate.

87. Continuing adjustment to fluctuations in real exchange rate (to

import and export prices and values of capital receipts and

obligation) does not increase the volatility of domestic cost and

revenue structure.

73
88. Despite the fact that Pakistan is a miniscule player in global

markets changes in its REER fully reflect changes in factor

productivity within the Pakistani economy.

89. The commodity consumption of the Pakistani price basket and

the tradable/non-tradable mix of its output is identical to that

of its major economic partners – USA, Europe, Saudi Arabia

and the UAE.

90. Non FATF capital flight is not a problem and capital controls

should be avoided.

91. Variation in global usury rates as they affect Pakistan’s REER

are always beneficial and the fact that the Pakistani

government cannot influence them need not be taken into

account in adjusting our macro-economy to continuing

fluctuations in REER. Similarly account need not be taken of

the adverse impact of commodity prices – such adverse

impacts simply cannot exist.

92. Determination of national usury and price structures does not

increase REER fluctuations.

93. Fluctuations in relative equity rates do not intensify REER

fluctuations.

94. The Purchasing Power Parity doctrine holds for transactions

between Pakistan and her global partners.

74
95. Currency depreciation (in accordance with variations in the

effective exchange rate) is enough to correct balance of

payment deficit.

96. Price elasticity of the demand for Pakistani exports is such that

devaluation in accordance with real exchange rate movements

can eliminate trade imbalances.

97. Accelerated depreciation does not lead to increased

dependence on foreign debt.

98. The necessary real wage depressing impact of devaluation is

not recognized.

99. Capital controls and extension of swap loans are not necessary

for arresting whole scale currency devaluation.

100. International financers, imperialist governments and local

banks and media groups never combine to create currency

collapse in order to achieve regime change as they did recently

in Turkey, Brazil and Venezuela.

101. Reducing tax rates will increase aggregate tax revenue (the

Laffer effect).

102. Monetization of the public debt is not necessary for

stimulating the economy.

103. Pakistani taxation capability is far in excess of existing

taxation levels.

104. Monetizing the public debt will necessarily fuel inflation

while raising taxation to pay off foreign debt will not.

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105. Does not explain how and why massive monetization of

public debt by the US, EU, China and Japan did not lead to

inflation during 2008-2019.

106. If the government acts as ‘employer of the last resort’ (the

new Chartist view) it can avoid both unemployment and

inflation.

107. Public investment “crowds out” private investment.

108. Increased taxation will not increase the maldistribution of

income and lower the real wage rate.

109. Switching from central to commercial bank borrowing by the

government will not have an inflationary impact.

110. Widening the tax base is not a means for making the earning

of Halal rizq more and more difficult and increased

monopolization of the economy.

111. Increasing defense expenditure has a negative impact on

growth.

112. Public investment growth (especially in heavy industries) is

not necessary for stimulating factor productivity growth.

113. Global economic shocks do not transmit to poor economies

suddenly and unexpectedly.

114. Integration into global markets does not reduce the power of

poor countries to react efficiently to unexpected, unforecastable

global market shocks.

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 115. The global economy is not overwhelmingly dominated by

the political, financial and technological powers of the

imperialist countries.

Altogether there are 115 assumptions which break down as follows:

False:1, 2, 3, 4, 11, 13, 14, 16, 18, 20, 21, 23, 24, 25, 26, 27, 28, 29, 31, 32, 33,

35, 36, 37, 39, 40, 41, 42, 43, 44, 45, 46,49, 50, 52, 53, 54, 57, 58, 60, 61, 62,

63, 64, 65, 68, 70, 74, 75, 76, 80, 81, 82, 85, 86, 87, 88, 89, 91, 93, 94, 96, 98,

101, 102, 104, 107, 108, 110, 112, 113, 114, 115

Not verified: 6, 8, 10, 12, 17, 19, 22, 30, 34, 46, 48, 67, 72, 73, 79, 83, 90, 95,

99, 100, 103, 106, 109, 111

Untestable Ideological: 5, 7, 15, 55, 59, 51, 105

Thus about two thirds percent of these assumptions are manifestly

false. It is clear that the global capitalist system does not function in

accordance with thepresumptions underlying IMF’s EFF (2019-2023).

Another (6 percent) are ideological and in principle not verifiable. 22

percent are verifiable but contrary evidence has been produced

sometimes they hold, sometimes they do not. Thus an over whelming

Kropation of the presumptions underlying the IMF projections are open

to very serious doubt. This illustrates that the IMF programme is

premised on extremely shaky theoretical foundations. It is premised on a

deliberate misunderstanding – with intention to deceive – of the

functioning of global capitalist economy. The programme may succeed

in that Pakistan is continuously able to pay Shylock his pound of flesh –

but the chances of its success in ensuring sustainable growth of the

77
Pakistani economy are non-existenal. Playing along with the IMF

amounts to committing national suicide.

D.2. The IMF’s EFF 2019-23

D.2.1. Stated Objectives

The stated objectives of the failed IMF’s EFF 2013-16 and that of the

current EFF 2019-23 are almost similar. These are of course not the real

objectives of these programmes – the real unstated objective is to ensure

that Pakistan continues to pay Shylock his pound of flesh regularly

(does not default). In this respect only has EFF 2013-16 has been

successful and the EFF 2019-23 program may also succeed in this

respect. In all other respects EFF 2019-23 will like EFF 2013-16 certainly

fail in achieving any of its stated objectives. These objective have been

extracted from two documents IMF Country Report No. 19/21 and IMF

Country Report No. 13/287.

Both the failed EFF 2013-16 and the current EFF are ostensibly

committed to the achievement of the following short and medium term

objectives:

1. Reduce the risk of a short term crisis (i.e. the possibility of an

international debt default)

2. In the medium term achieve high and more inclusive growth

3. Fiscal consolidation – i.e. reduction of the primary fiscal deficit

(exclusive of payments to domestic and global Shylocks)

4. Jacking up of energy prices

5. Reorienting monetary policy to build up international reserves

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 6. Jacking up of taxation revenue

7. Liberalize the trade regime

8. Privatizing public enterprise

9. Central bank independence – i.e. subservience to global capital

markets and the Fed.

In addition EFF 2019-23 includes the following objectives:

 The operation of a flexible market based exchange rate regime

 Strengthen economic management systems and institutions

and subordinate commitment to the implementation of the

fiscal consolidation programme

 Provision of measures for empowerment of women to ensure

defeminisation of Pakistani society

 Eliminate central bank financing of the fiscal deficit

 Ensure strict compliance with FATF qualification criteria

It is clear that Vodoo economics inspires the macroeconomic

framework of both the failed EFF 2013-16 and EFF 2019-23. Like the

American military, EFF 2019-23 asks Pakistan to “do more”, do more to

accentuate the process of de-sovereignization of the Pakistani state, do

more to submit to imperialist hegemony.

D.2.2. Upfront Measures

The IMF commands to “do more” to subordinate Pakistan to

imperialist dictates is evident from the “upfront” actions of our

governments to persuade the IMF to initiate these programmes. Upfront

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measures (those which the government implemented prior to the launch

of the EFFs) for the EFF 2013-16: are

 Increased aggregate tax revenue by anticipated receipts 0.75

percent of GDP achieved by an increase in the GST rate, higher

personal income tax rates, higher excesses, increase in withholding

tax rates.

 Imposition of a new gas levy

 Periodic increase in electricity prices

 Imposition of a new levy on movable assets

 Reduction in subsidies on electricity

 Reduction in ministries non-wage current expenditure

 Reduction in public capital spending

 Include 300,000 new tax payers in the tax base

 Increase in risk based tax audit

 To build up reserves SBP purchased $125 billion in the interbank

market by July 2013

 SBP to ensure that all banks achieve capital adequacy benchmark

ratios by December 2013

 Commitment to pay of Rs.503 billion of circular debt to energy

companies by August 2013, Rs.342 trillion paid of by end June

2019.

 Determination of base tariff rate by NEPRA reduced to 90 days

 Commitment to transfer to private management of DISCO and

NTDC by December 2013

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 Commercialization of WAPDA and introduction of “competitive”

pricing and direct contracting between power producers and

direct electricity producers

 Periodic increase in gas tariff

 Modification of tariff structure by December 2013 and phase out of

trade SROs by June 2014

 Extending to India, most favored nation trading status

 Plan full privatizing/restructuring 30 public sector firms to be

finalized by September 2013

 Part privatization of PIA by December 2013 and a large scale

retrenchment of PIA employees by June 2014- PIA by which time

26 percent of shares will be sold to private investors

 Agreement to privatize several other enterprises in the financial

sector (all three government owned banks except NBP) and energy

sector. Transaction advisors to be hired by December 2013.

Minority share of two blue chip government companies also to be

sold

Upfront measures of the EFF 2019-23 programme are as follows:

 The 2019-20 federal budget was designed strictly in accordance

with IMF instructions

 Commitment to maintaining a flexible market determined

exchange rate; in effect tolerate continuous depreciation of the

Pakistani Rupee which increased throughout the post Ishaq Dar

period

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 Dismissal of the incumbent state bank governor and the federal

minister of finance and the appointment of IMF hireling Raza

Baqir and Hafiz Shaikh in their place

 Dismissal of the FBR Chief and appointment of the IMF nominee

Shabbar Zaidi in his place

 Budget 2019-20 envisages a reduction of the non-usury related

(primay) budget deficit to 0.6 percent of GDP from 1.8 percent of

GDP in 2018-19

 Tax exemptions of exportable sectors withdrawn

 Sales tax on petroleum products

 Preferential taxes for sugar, steel, edible oil, medium and large

retailers abolished and GST 17 percent tax rate imposed

 Income tax threshold reduced

 Commitment to increase tax base to eliminate halal rizq through

intensified state persecutions

 Tax rate for top income groups increased

 Withholding tax on telecom services introduced

 Credit available for machinery imports “rationalized” i.e reduced

 Higher federal excise duties levied on cement, cigarette and soft

drinks

 Customs duty rates on import of liquefied natural gas (LNG) and

luxury goods

 Cap on wages of federal and provincial government employees

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  Increase budgetary expenditure on BISP by 0.4 percent of GDP in

FY 19/20

 Commitment to create a Pakistan Infrastructure Bank under the

surveillance of imperialist financial agencies

 Commitment to lengthen the maturity of domestice public debt

 Signing of a formal written agreement between the federal and

provincial governments endorsing the IMF imposed fiscal

strategy. Detailed provincial revenue and surplus targets have

been agreed upon for FY 2020. The anticipated NFA will be subject

to these agreements and associated targets

(This shows that despite its clamor against rising prices and growing

unemployment the People’s Party ruling Sindh fully supports the IMF’s

EFF programme. This is because like all other secular parties in Pakistan

it is an imperialist pawn.)

 Provision of Rs.1,000 ($6) to every recipient of the BISP during

FY2020

 Launching financial inclusive programme for women in banks to

accelerate social de-feminisation by October 2019

 Subjecting BISP financing to donor surveillance

 Commitment that SBP intervention in the foreign exchange market

will be limited and will be subservient to imperialist capital and

currency market trends.

83
 SBP’s policy rate increased by over 250 percent before start of

IMF’s EFF. Commitment to seek policy rate above inflation (i.e. in

double figure) through FY 2020

 End central bank financing of the budget deficit

 Amend the SBP Act by December 2019 to subject it completely to

imperialist surveillance and governance

 Lengthen the service tenure term of the IMF stooge – Raza Baqir –

the governor imposed upon SBP in May 2019 from three to six

years

 Commitment to relax exchange restriction (i.e. capital controls),

remove the requirement to fully prefund letters of credit and the

requirement to restrict advance payments on imports against LOC

or impose any other import restriction during FY 2019/20

 By August 2019, identify “terror” financing risks, complete cash

assessment, impose financial sanctions as mandated by the

imperialist powers, apply risk based financial supervision of

financial institutions and demonstrate enforcement of violation of

imperialist import sanctions

 Increased electricity tariff by 10 percent in July 2019, further

increase introduced in August 2019. Commitment to continuously

raise electricity rates on a quarterly basis throughout FY2020

 IMF to develop a circular debt reduction policy which the

government will introduce during FY20

 Introduction of automatically quarterly energy prices increase

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  Gas tariff increase from July 2019 and amendment of OGDA Act

by December 2019 to speed up mobilization of automatic periodic

tariff increase

 Commitment to privatize profit making state enterprises

 Attempt to privatize public enterprises in power, banking and

hotel sector during FY20 and to sell off government minority

shares in a petroleum firm

 Develop a comprehensive list of public companies to be privatized

and/or liquidated by September 2020

 PIA and Pakistan Steel Mills to be subjected to imperialist auditor

surveillance (who will in effect conduct due diligence exercises) by

December 2019

 IMF will prepare a new law for state owned enterprises for

promulgation by September 2020

 The IMF will also determine the constitution and operational

procedure of, a state holding company to be established in FY2020.

This holding company will restructure and rehabilitate Pakistani

state enterprises so that they can be sold off to the imperialists

 The programme also facilitates Indian sabotage as there is a

commitment to “improve” trading across borders by “liberalizing”

administrative procedure

This is a draconian list. It illustrates that following Nawaz Sharif’s

footsteps Imran Khan surrendered national sovereignty to the

imperialists and their agents most abjectly in 2019 – and had been

85
preparing to do this from the day he took office in August 2018 (or

perhaps even earlier). Despite this abject surrender the IMF does not

trust him and has devised a strict system of surveillance and espionage

to ensure that its commands are obeyed to the best of its servants’

abilities. This is evident from the surveillance mechanisms were

structured into the programme.

D.3. IMF Surveillance and Espionage Mechanisms

Most of the IMF’s surveillance and espionage mechanisms are

identified in the Technical Memorandum of Understanding included in

the EFF agreement but they exclude the two most important IMF

initiatives in this regard. Below we list the surveillance and espionage

mechanisms that the IMF has crafted to ensure the implementation of

the EFF.

 The dismissal of the minister of finance and the SBP governor

who had lead the negotiations with the IMF during November

2018 to May 2019. This meant that the Pakistan brief to these

negotiations was contemptuously discarded and the IMF staff

dictated the terms of the Agreement.

 The appointment of IMF quisling hireling Raza Baqar and IMF

fellow travelers quislings Hafeez Shaikh and Shabbar Zaidi as

governor SBP, Federal Minister of Finance and Economic Affairs

and Chairman FBR respectively. This amounts to a total surrender

of Pakistan’s economic policymaking process to the imperialists.

Baqar, Shaikh and Zaidi are primarily answerable to the IMF not
86
 to the Pakistani government. Their mandate is to ensure that the

commands of their imperialist masters are obeyed and these

commands take precedence over all other obligations of the

Pakistani government.

 The programme is subject to quarterly reviews, the meeting of

quarterly performance criteria and continuous performance

criteria

 Establishment of an agreement between the IMF on the one hand

and the SBP and Ministry of Finance on the other to monitor the

use of IMF funds for budget support. Principally these funds will

be used for paying of the foreign principle and usury obligations

on the fiscal current account.

 The Technical Memorandum of Understanding describes in detail

how the implementation of the quarterly and continuous targets

will be assessed. Definitions are established for measurement of

Net International Reserves of SBP (NIR), Gross International

Reserves of SBP, Reserve related liabilities of the SBP, gross sale of

foreign exchange, aggregate net reserve in foreign exchange

derivatives, net purchase of foreign exchange, net domestic assets

(NDA) of SBP, reserve money (MO), stock of net foreign currency

swaps, general government budget deficit, net external financing,

change in net domestic credit from the banking sector, change in

net domestic non-banking financing, primary budget deficit, net

external budget financing, net government budgetary borrowing

87
 from SBP, liability management operation, cash transfer (BISP)’s

pending, FBR net tax revenue, net accumulation of tax refund

arrears, power sector payment arrears, and electricity tariff

pricing formulas.

Data to be continually supplied to the IMF on a daily, weekly,

fortnightly, monthly and annual basis throughout the programme

period is as follows.

Daily:

1. international reserves,

2. SBP swap operation

3. Interbank rapo volume and usury rate

Weekly:

1. SBP balance sheet summary

2. SBP repo and open market operations

Fortnightly:

1. Bank excess reserves in local currency

2. T. Bill and bond operations

Monthly:

1. Consolidated balance sheet of commercial banks

2. Weighted average of exchange rates

3. Term breakdown of swap/forward contracts

4. Outstanding, swap/forward transactions

5. Sectorial distribution of loans and deposits

6. Capital adequacy ratios of all financial institutions

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 7. Banks’ net foreign exchange position

8. Workers’ remittances

9. Detailed BOT

10. Disbursement and outstanding stock of government debt

11. State of the federal budget (actual)

12. Detailed financing plan for the country for the next 12

months

13. Total general government spending

14. Detailed price index

15. Index of core inflation

16. Total revenue collection

Quarterly:

1. Net international reserves

2. Net foreign financing

3. Bank loan maturities

4. Banking sector core financial liability indicators

5. Results of banks’ stress tests

6. Privatization receipts

7. Foreign assistance received

8. State of government borrowing

9. State of government SBP borrowing

10. GST refunds data

11. Number of taxpayers

12. Detailed data on value of imports and duty paid

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 13. Company audit data

14. Detailed power sector statistics

15. Detailed DISCO statistics

16. Energy arrears

17. UFC losses

18. BISP cash transfers

19. Ministry of Finance financial statement including cash flow,

income statement and operational indicators for PIA, Pakistan

Steel Mills and Pakistan Railways

Annual:

1. Notified relevant legislation enacted

2. Consolidated general government (federal and provincial)

budget

This is a comprehensive list for total sabotaging of the Pakistani

economy by the imperialists. The definitions and methods of

measurement of programme variables are all in accord with IMF

standards and no account is taken of deviation from Pakistani

definitions and methods of measurement of these items. Assessing

programme implementation on these bases tantamount to assessing

Pakistan’s complete transformation into a vassal imperialist economy

totally devoid of any elements, whatsoever, of its national sovereignty.

Our key policymaking institutions – the State Bank, the federal ministry

of finance, provincial departments of finance, the federal board of

revenue and the ministries of petroleum, water and power have become

90
pawns and clerks serving the IMF and reporting compliance to its

draconian policy directives on a daily, weekly, fortnightly, monthly,

quarterly and annual bases – all for a meager $6 billion.

D.4. IMF Policies
The IMF macroeconomic framework anticipates real GDP growth to

decline to 2.4 percent in FY20, equal 3 percent in FY21 and rise to 5

percent in FY2022/23 – average GDP growth during the EFF programme

period is thus expected to be 3.6 percent. During the previous four year

FY2016 to FY2019 GDP grew by 4.8 percent average annually – thus

GDP growth rate is expected to be cut by a quarter during the

programme period in contrast with medium term trends. The inflation

rate is expected to be 13 percent in FY19, 8.3 percent in FY20 and fall to 5

percent by end of the programme period. Inflation during the

programme period is expected to average 8.1 percent as against 4.6

percent during the previous three years – thus inflation is expected to

double during the programme period as compared to medium term

trends. No estimates/forecasts have been provided by the IMF for REER

but given that an 8 percent inflation rate is likely to be almost three

times higher for Pakistan’s in comparison with major trading partners,

the market driven nominal exchange rate is sure to depreciate

significantly during the programme period.

Gross capital formation is expected to decline to 14.7 percent of GDP

in FY10 and to average 15.6 percent over the programme period down

from 16 percent during the previous four years – a decline in the

investment/GDP ratio of about 4 percent. Government gross capital

91
formation stagnates at 3.6 percent during the programme period.

Government saving is expected to average just minus 1.6 percent of GDP

during the programme period. Total national savings are expected to

average 14 percent of GDP during FY20 to FY23, one of the lowest

saving ratios ,in Asian Government sector saving is anticipated to

average minus 4.2 of GDP despite a massive increase in tax revenue

which is expected to increase from 12.6 percent of GDP in FY19 to 17.6

percent of GDP by FY23 – a near 40 percent increase in this ratio.

Development expenditure is expected to fall from 4.2 percent in Nawaz

Sharif’s last year of office to 3.3 percent of GDP in FY20 and to average

3.6 percent of GDP during the programme period. Current expenditure

will increase from 18.6 percent of GDP in FY19 to 19.6 percent in FY20

and average 19 percent of GDP during the programme period – not

significantly different is a ratio from that of the previous three years.

Primary fiscal balance is expected to increase from minus 1.6 percent of

GDP in FY19 to as high as 2.7 percent of GDP by FY23. While the overall

fiscal balance is expected to remain negative averaging minus 4.6

percent throughout the programme period. This shows that a gigantic

proportion of government revenue and foreign capital inflows will be

continued to be devoted to paying Shylock his pound of flesh.

Net foreign capital inflows are expected to increase from 10.9 percent

of GDP in FY19 to rise to 11.6 percent of GDP by end of programme

period. Net foreign direct investment inflows are expected to rise from

1.8 percent in FY19 to 4.4 percent of GDP in FY23 – averaging 3.2 percent

92
of GDP throughout the programme period. The domestic to foreign

investment ratio is thus expected to rise from 14.4 percent in FY19 to 34.9

percent – a fantastically unrealistic expectation.

The current account deficit is expected to rise from minus 1.7 percent

of GDP in 2019 to minus 4.6 percent of GDP by FY23. Official reserves

which were 16.1 percent of GDP in FY17 are expected to fall to 11.2

percent in FY20, rise to 14.5 percent of GDP in FY21 and jump

dramatically to 24.9 percent in FY23. Government estimated debt which

was 70 percent of GDP in 2017 is expected to rise to 70.8 percent by FY23

and to average 76.0 percent over the programme period.

Pakistan’s gross external financing requirements are expected to

increase from US$25.5 billion in FY19 to US$27.5 billion in FY24 with

their GDP share invariant as an average of 9.5 percent during the

programme period. During the programme period Pakistan will pay its

foreign usurers a total sum of about 140 billion in amortization and

usury payments – usury payments will amount to about $34 billion.

Private sector amortization will amount to $33.5 billion over FY20 to

FY24 – about 24 percent of total amortization changes. Amortization of

short term borrowing of both the government and private sector

amounts to as much as $57.6 billion – i.e. about 54.4 percent of

amortization changes. Short term borrowing and commercial borrowing

is of course much more expensive, carrying market determined usury

changes.

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 The balance of trade deficit is not expected to decline significantly

during the programme period. IMF forecasts exports to grow at an

annual average rate of about 7 percent during FY19 to FY23 while

imports are expected to grow at an annual average rate of about 5

percent. The trade deficit is expected to rise slightly during the first two

years of the programme. Imran Khan’s import curbs are expected to

peter out during FY20 and the IMF has strictly forbidden the imposition

of any further import constraints during the programme period. The

balance on goods, services and income account is expected to remain

highly negative during the programme period averaging about $34

billion. Workers’ remittances are forecast to increase from $21.5 billion in

FY19 to about $25.8 billion in FY23. Foreign direct and portfolio

investment is expected to rise from $600 million in FY 19 (DFI = $1.8

billion PFI minus $1.2 billion PFI) to about $ 6 billion in FY23. Terms of

trade are expected to decline throughout the programme period.

According to IMF projections Pakistan will borrow $44 billion from

private sector and $61.6 billion from foreign government during the

programme period – a total of $117.7 billion. Actually this limit will

probably be exceeded during FY20. Besides this rollover of short term

debt will amount to $43.2 billion during FY20 to FY23 - $25.3 billion (59

percent of the total) is expected to be rollover of private sector credit

which will involve the payment of higher usury rates.

According to IMF projections the share of direct tax in total tax

revenue during the programme period will be just 32.1 percent with

94
very minor fluctuations during FY20 to FY23. The share of non tax

revenue in total government revenue during the programme period is

forecast at just 10.4 percent. Grants are expected to amount to Rs.319

billion ($2.2 billion) at the programme exchange rate of Rs.141 = $1 and $

2 billion at the August 2019 exchange rate. The grant to total government

revenue ratio works out at 0.8 percent during the plan period.

According to IMF projections total expenditure of the government is

to rise from Rs.8380 billion in FY19 to Rs.13810 billion in FY23 (up 66

percent). Current expenditure is expected to increase from Rs.7190

billion in FY19 to Rs.11475 billion in FY23 (up 60 percent). Usury

payments (both domestic and foreign) are expected to rise from Rs.1994

billion in FY19 to Rs.3308 billion – up 65 percent – FY2023. The share of

total usury payments in current expenditure during the plan period

works out at 31.4 percent. This estimate does not include usury

payments by the provincial and local governments. Foreign usury and

principal repayments are expected to increase from Rs261 billion in FY19

to Rs.506 billion (up 94 percent) during the programme period. Foreign

usury and principal repayments as a proportion of current expectation is

expected to increase by as much as 22.2 percent during FY19 to FY23.

IMF budget support amounts to just Rs.109 billion ($773 million) at

programme exchange rates. This is 0.26 percent of current expenditure.

According to IMF projections defense expenditure is to rise from

Rs.1312 billion in FY20 to Rs.1832 billion in FY23 and to average 15.4

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percent during the programme period. Subsidies expenditure totals just

Rs.1293 billion – 3 percent of current expenditure during the programme

period. Development expenditure is to grow from Rs.1484 billion in

FY20 to Rs.2333 billion in FY23, lower than the rate of current

expenditure growth during the programme period.

External funding of the budget deficit will amount to 43.4 percent

during the programme period declining from 56.7 percent in FY20 to 39

percent in FY23. The IMF share of deficit financing will be just 11.5

percent. The IMF expects no revenue from privatization during the

programme period.

The monetary forecasts are even more fantastic. Estimations are

provided only for FY2020 during which NFA is expected to increase by

Rs.354 billion – during FY2019 NFA contracted by Rs.1233 billion. Net

domestic assets grew by Rs.18945 billion in FY19. However IMF

forecasts for the whole of FY 19 show NDA to equal Rs.18130 – down 4.3

percent over the end of FY19 level. During FY20 not credit to the private

sector is forecast as growing by 4.7 percent while net claims on

government are expected to grow by 7.6 percent. Despite this ‘broad

money’ (M2 not M3)is expected to contract by nearly 20 percent by end

FY23 – signaling a sharp fall in the loan-deposit ratio. Rupee deposits are

expected to increase from Rs.11578 billion in FY19 to Rs.12973 billion (up

12.6 percent) in FY20 and foreign currency deposits are forecast to

increase by 22.6 percent during FY20. The share of foreign currency

deposits in total bank deposits is expected to increase to 8.5 percent.

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Reserve money (Mo) is expected to increase from Rs.6345 billion in FY19

to Rs.7202 billion (up 13.5 percent) in FY20 and Mo/M2 ratio is expected

to remain constant at about 36 percent during FY20.

E. Assessment
The IMF forecasts are subject to extremely wide margins of error.

This becomes evident if we compare the IMF forecasts for the previous

EFF (2013-16) with actual outcomes for the FY2014-2018 period for

which IMF presented its forecasts. This is done in Table A.

Table A: Difference between Actual Outcomes and IMF forecasts for
major macroeconomic statistics with IMF’s EFF module 2014-2015.
Item Discrepancy between actual

outcome and IMF forecast for

FY2014-2018 (average) (percent)

GDP growth rate 26.5

CPIC percent) 14.84

Gross saving / percent of GDP) 13.46

Gross Investment percent of GDP 21.22

Current account balance ($m) 141.61

Gross reserves ($ billion) 15.59

Extended debt ($ billion) 64.33

Government revenue as percent of 5.8

GDP

Tax revenue (as percent of GDP) 3.14

Government expenditure of percent 7.61

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GDP

Current expenditure as percent of 2.91

GDP

Development expenditure as of 14.85

GDP

Exports of as percent GDP 32.35

Source: IMF Country Report no. 13/287

Government of Pakistan: Pakistan Economic Survey 2018-19

In most cases deviations of actuals during 2013-18 from IMF forecasts

are so large that they make the forecasts virtually meaningless. This is

particularly true of the forecasts for:

 Current account balance

 External debt

 FDI

 GDP growth

 Gross capital formation

 CPI Inflation

On the other hand deviation in, tax receipts, total budget expenditure

and current expenditure were modest showing that the government

followed the fiscal strategy of the EFF 2013-16 programme for most of

the programme period.

Average deviation (simple unweighted) of actuals from forecasts for

the 14 variables listed in Table A works out at 27.6 percent.

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 There is every reason to believe that the forecasts for the FY2020 to

FY2023 period are far more inaccurate and unrealistic than the forecasts

for the FY13-18 period. This is because the main thrust of both EFF

programmes was to subordinate the Pakistani economy to global

markets and imperialist policies. The 2013-18 period was a period of

modest global recovery and macroeconomic stability. In contrast the

2020 to 2023 period is likely to see another recession beginning in

America in 2020 or 2021 and gradually spreading to the EU, China and

the so-called emergent economies. Moreover as the Americans flee

Afghanistan like whipped dogs with their tails between their legs, the

coalition support fund will collapse and imperialist lifelines will no

longer be avoidable for puppet regimes throughout the Middle East.

Linking Pakistan’s economy to the global economy during this period

(or indeed ever) is nothing short of madness.

EFF 2020-2023 forecasts an average annual GDP growth rate of 3.7

percent during the programme period – given a population annual

growth of 2.4 percent, real per capita income is expected to rise by about

1 percent on average. During this period the gross capital formation

ratio is forecast at 15.82 percent – as against 16.1 percent during the

previous three years. While GDP growth rises from 2.4 percent in FY20

to 5.0 percent (more than double) according to the programme forecasts

the investment GDP rate rises from only 14.7 percent in FY20 to 16.4

percent (up just 11.5 percent) in FY23 – a sharp increase in the

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incremental output- capital ratio is anticipated in these programmes

implying relative de-industrialisation.

But where will this increase in capital productivity come from? The

words “productivity” and “productivity growth” do not occur in the

EFF agreement documents and although stresses the direct impact of its

policies on “structural change” it sees structural change as entirely as a

financial – not a real sector phenomenon. Even if the “structural change”

– fiscal and monetary tightening and enhanced global money market

exposure – is achieved how will this transmit to the real sector, to

production levels, to technological absorption capability, to employment

growth to profitability of enterprise. This is a crucial weakness of Vodoo

macroeconomics. It is purely focused on exchange transactions and is

silent about production sector dynamics. In the Vodoo perspective the

aggregate supply curve shifts to the right essentially for reasons

unknown.

As several UNIDO studies (1999) have shown productivity growth in

the real economy is largely determined by with an increase in the

technological intensity of aggregate production and in a consequent rise

of capital goods industries in manufacturing value added (MVA). This

issue does not at all concern the EFF policy programmes (for Pakistan or

any other country). A recent study of the determinants of growth in

Pakistan shows that real GDP growth has no relationship with trade

openness, borrowed money, real exchange rate, external debt, foreign

direct investment and domestic credit to private sector and the only

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significant positive impact on GDP growth in that of gross capital

formation and remittances (Gilal et al. 2019). This shows that changes in

financial sector policies (fiscal, monetary, exchange rate changes) have

virtually no impact on growth or structural changes in the real economy

and determination of the two real sector variables – gross domestic

capital formation and workers’ remittances – are neither identified nor

of any concern in the EFF policy proposals.

The EFF leaves the government with three policy instruments only

for unleashing “the magic of the market” and that too very modestly –

remember GDP per capita is expected to grow by about one percent per

annum during 2020-2023. These three policy instruments are:

1. Tax (especially indirect tax) revenue

2. Usury rates and money supply (especially MO)

3. Nominal exchange rate

As we have seen (Table A) the government has been most successful

in meeting EFF (2013-16) gross revenue and tax receipts charges and we

can expect the government to religiously follow the EFF 2020-23 strategy

during this period – for national elections are not due until the

beginning of FY24 (although some departures from IMF strictures may

be expected during the second half of FY23 – the FY24 budget will

probably be an expansionary one) but it will probably leave no positive

impact on growth or structural change in the real sector. This is because

government investment as a proportion of GDP is projected to fall from

4.1 percent during FY17 to FY19 to 3.6 percent of GDP during FY20 to

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FY23. Increased government revenues will be spent on usury payments

(to both domestic and global Shylocks) and for the government’s current

expenditure and as the Gilal (2019, p. 49-50) study has shown both. They

are negatively associated with growth and also of course with real sector

structural changes – for public investment is vitally important for

technological upgrade and for reviving the capital goods industries.

There are two major goals of enhancing the tax base initiatives (a)

increasing resources for foreign and domestic usury and gharar

payments (b) reducing the scope for halal business and accelerating the

monopolization of the economy. This will of course be resisted by the

mukhliseen-e-deen and manufacturers and traders who seek to remain

outside the usury and gharar markets. The extent to which this

resistance can be overcome remains an open question.

The EFF proposed tax structure is viciously regressive as is the whole

of the EFF program. Despite its hypocritical talk of “poverty reduction

and social protection” no estimations of expenditure envisaged in this

regard are included among its projections. The focus here is exclusively

on an expansion of the corruption ridden Benazir Income Support

Program. Nothing at all is said about the viciously inequitable pattern of

income and wealth distribution in Pakistan. No measures are proposed

for reducing income and wealth inequalities.

The EFF’s poverty related measures include (a) stimulus for

accelerating the de-feminisation of Pakistani Muslim women (b)

provision of a one off Rs.1000 ($6) grant to approximately 5 million BISP

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beneficiaries (total cost in FY20=Rs.5 million ($34000) (c) launching the

‘one woman’s account for accelerated defeminization (d) providing a

‘girl bonus’ of Rs.250 ($1.50) for girl students on a quarterly basis (e)

unspecified increase in BISP cash transfer to recipients in the future.

Allocations in this regard are so meager that no poverty reduction

targets are envisaged in the EFF quantitative performance criteria on the

basis which of the government’s performance will be evaluated on a

quarterly basis. The structural conditionalities related to poverty

reduction are purely administrative – expansion of BISP’s banking

contracts for defeminization of Pakistani Muslim women and denying

them halal rizq, updating the BISP data base and expanding the

provision of girls’ education under the BISP program. Dates are set for

the implementation of these structural conditionalities. In the federal

budget for FY20 the government has allocated Rs.190 million ($1.2

million assuming that the Rupee-dollar exchange rate stabilizes at the

Rs.157=$1) for ‘social protection’. This is 2.6 percent of total current

expenditure set against the Rs.3.98 trillion the government has allocated

for domestic and foreign usury payments in the FY2020 budget, This

illustrates the ‘priority’ that the supposedly populist government assign

to poverty reduction.

The meager resources allocated to ‘social protection’ do not even

marginally mitigate the colossal regressive impact of Imran Khan’s

fiscal, monetary and exchange rate policies – absolute poverty levels will

probably increase during the period due to growth deceleration,

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harassment and persecution of the hala sector and the mustadafeen and

expanded monopolization and domination of the national economy by

imperialism. Moreover the tax revenue estimates of the EFF are not

based on a careful assessment of Pakistan’s taxable capacity which may

actually decline as the pattern of income distribution implodes and the

resistance to the persecution of the mukhliseen-e-deen and the

mustadafeen increases. Existing signs are ominous. The budget deficit

has soared to 8.9 percent of GDP in FY19 and there has been a record

shortfall in FBR revenue receipts while government’s current

expenditure has soared. It is also almost certain that the Laffer effect will

not appear in Pakistan – a reduction of corporate and bank tax rates will

be accompanied by a decline in tax revenue from these tax sources.

Corruption under the Tahreek-e-Insaf regime is no lower than that

under previous secular regimes and this, there is no guarantee that

increased government revenue will not be illegally appropriated in the

form of illicit expenditure fraudulent payments and bribe. There is also

the likelihood that tax revenue will be increasingly channeled for foreign

usury, gharar and principal payments or for transfer to global markets

(through capital flight).

Raising taxation levels will of course depress the economy and

contribute to the massive growth of underemployment – it is significant

that no estimation of the employment impact of the IMF’s

macroeconomic strategy are given in the EFF program papers. Nor are

any estimates of Pakistan’s (potential) full employment output levels

104
given in these projections. The impact of increased taxation on real wage

growth is also ignored. Tax increases are accompanied by massive cuts

in government subsidization of real economic activity. This is again

likely to be a major negative impact on income and price levels

throughout the economy.

The presumption that a tight fiscal and monetary policy will lead to

the emergence of the ‘right prices’ structures in Pakistani markets is

entirely fallacious. This is because these ‘right prices’ are seen to be those

produced by continuous adjustment to continually fluctuating global

prices determined in markets where Pakistan has a minimal presence

and is always a necessarily a price taker. Reformulating Pakistani price

and cost structures in accordance with global market trends makes no

sense at all.

The stagnation of state expenditure – its virtually complete

withdrawal from the commodity producing sector – as envisaged by the

EFF program heralds accelerated de-industrialization and technological

retardation of the Pakistani economy – public investment is a primary

source of capital industry growth in almost all emergent economies.

This has usually involved a monetization of the public debt in most

‘emergent economies’ which the EFF program faults without suggesting

any other source for funding public investment and no evidence is

presented to show that monetization of the public debt will necessarily

fuel inflation which in Pakistan in a demand side phenomenon. The

experience of the metropolitan countries during 2008-2019 shows that

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monetization of the public debt has not lead to any upsurge in

inflationary pressure. Moreover Uray and the New Chartist School have

shown that if government acts as ‘employer of the last resort’ it can

avoid both unemployment and inflation. The IMF provides no evidence

for refuting this argument and it is particularly significant that

government which in its 2018 election manifesto promised to create 10

million new jobs during FY2019 to FY2023 has timidly accepted IMF’s

commands in this regard.

The decline in public investment in Pakistan will not only lead to

technological retardation but it will also lead to the growth of aggregate

unemployment and underemployment because the growth elasticity of

private to public investment in Pakistan is high and positive – here

public investment ‘crowds in’ private investment, it does not ‘crowd it

out’ contrary to IMF expectations. The growth of public investment is

also a major cause of factor productivity growth especially in a poor

economy. This is completely ignored in the EFF strategy as is the likely

inflationary impact of shifting from central bank to commercial bank

financing of the budget deficit.

Usury rate structures are another key variable in the EFF policy

package manipulation of which is regarded as necessary to achieve

‘structural adjustment’ and ‘sustainable’ growth. The policy rate was

arbitrarily jacked up to 13.25 percent by Raza Baqir, the IMF quisling

hireling governor of the State Bank immediately after his appointment –

despite the fact that global interest rates remained below 2 percent and

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the bale rate in India is below 5 percent. The IMF mantra is that usury

rate structure when adjusted to global market trends will be capable of

absorbing all shocks emanating from the global economy (both

economic and political). This is contrary to the experience of all

metropolitan and ‘emergent’ capitalist economies over the medium term

business cycle. We also know of course that usury rate escalation will

jack up foreign and domestic outstanding debt and debt service charges

in rupees and since usury is a cost of production a rise in usury rates

will also lower profits in the real economy and increased prices.

Setting international usury rates as benchmarks for Pakistan’s

monetary policy management makes no economic sense for we are a

minuscule player (almost invisible) in global financial markets and play

no role whatever in the determination of global loans, bond and

currency market trends. Global financial markets are highly

monopolized reflecting sudden expectation variations and can in no

sense be described as ‘efficient’.

The IMF has provided no evidence to demonstrate its primary

presumption – that improved debt servicing capability enhances

sustainable growth. Quite the contrary in many notable cases – Iceland,

Ecuador, even Pakistan during 2002-2007 – revitalization of growth has

required a reduction and re-scheduling of the external debt burden. The

imperialist bias of the IMF program is most clearly evident in its

complete silence about the possibility of reducing the debt and debt

servicing burden on Pakistan through negotiations with its public and

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private foreign creditors and through a rationalization of the domestic

debt burden as has been achieved in Argentina, Bolivia,Ecudo and

Iceland through institution of an audit of external debt and drastic

conciliation of ‘odious debt’.

There is no proof that reducing usury rates and increasing money

demand is necessarily inflationary. Low interest rates and high

monetary asset growth have been accompanied by historically low

inflationary levels in America, Europe and Japan during 2008-2019.

It is also of course manifestly absurd to believe that when the SBP

follows pro market determined usury rates in setting the base rate, it

quickly restores full employment equilibrium in response to external

shocks. All the evidence in the capitalist world – in America, Europe,

Japan and the emergent economies – is that in periods of economic

difficulties it is the commercial banks that follow the central banks’ lead

and depend on its arbitrary – arbitrary because a ‘natural’ interest rate

simply does not exist – manipulation of the policy rate.

The IMF does not recognize the extreme monopolization of global

financial markets, the exceptionally dominant role of ‘irrational’

expectations in the determination of their functioning nor the bi-

directional relationship between expectational fluctuations and

macroeconomic fundamentals. An increased expectation of a global

downturn can have a disastrous impact on the Pakistani economy

through both its current capital accounts depending on the degree of

‘openness’ that its pro-imperialist rulers have crafted. Increasing

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exposure to global financial markets is likely to increase the inefficiency

and inequity of national markets since as prices are subjected to global

market processes they become less reflective of domestic cost and

productivity structures. Financial liberalization necessarily erodes

national sovereignty and dealing with economic downturns in response

to global shocks has invariably involved the imposition of capital

controls – which the IMF prohibits – in the emergent markets. This is

because financial liberalization normally leads to massive capital flight

from emergent and poor countries especially in periods of economic

downturn. Subordination to global usury and gharar markets does not

‘stabilize’ poor economies. It is an important means for destabilizing

them.

The IMF does not recognize that in capitalist dominated economies

usury is a cost of production from the point of view of the non-financial

capitalist of accessing the financial markets. A rise in the interest rate

structures necessarily negatively impacts upon profit levels and also of

course jacks up the price level. One the other hand it does not

necessarily increase savings – for this depends on the interest elasticity

of the savings function. In Pakistan the interest elasticity of household

savings – which is the bulk of aggregate savings is nationally low.

Corporate hoarding is high, self-financing of corporate investment is

low. Bank lending at the long end of the market is also notoriously low.

Thus while high and rising interest rates continue to depress investment,

they will almost certainly not lead to an increase in savings.

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 According to IMF estimates (Table A2) non-government saving as a

percent of GDP is expected to decline from 15.9 percent in FY20 to 13.6

percent in FY23 while total national saving rise from 12.1 percent in

FY20 to 14.2 percent in FY23. The source of this increase is government

sector saving which is forecast to rise from minus 3.8 percent in FY20 to

1.2 percent in FY23. The gross capital formation rate is forecast to rise

from 14.7 percent of GDP in FY20 to 16.4 percent in FY23. Paradoxically

despite the IMF emphasis on state withdrawal from the economy it is

the state – and not the corporate sector which is expected to finance

Pakistan’s economic recovery. Why?

There are in any case absurdly optimistic forecasts. If usury rates

remain high – and probably rising – during the program period as the

EFF envisages both corporate and public enterprise sector profitability

and investment will plummet and savings will assuredly stagnate.

If interest rates are high and rising banks will become more

conservative lenders for risk associated with the growth of non-

performing loans (the infected proportion of the loan portfolio) will rise

while deposits, which as we have seen are interest inelastic will stagnate.

Therefore the bank determined relatively low credit to deposit ratio will

continue to remain low throughout the program period and the bank

determined reserve ratio will probably remain high. Non-financial,

agricultural, manufacturing and service enterprises will remain credit

starved especially for project financing. In any case the banking sector in

Pakistan will be subjected to increased monopolization trends. Usury

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term structures will not reflect opportunities for real sector profitability

and productivity growth in the economy. The possibility of

usury/gharar frequently overshooting gross profit rates – leading

bankruptcies is very real and already visible in Lahore, Faisalabad,

Multan and Karachi. The IMF simply closes eyes to the fact that market

determined usury (and foreign exchange rates) can often be pro-cyclical.

The EFF program regards MO as being exogenously determined by

the SBP. This is a simplistic view. The relationship between MO, M1, M2

and M3 growth is undoubtedly bi-directional and it is often the case that

the SBP is forced to expand or contract MO volumes in response to

movements in the other monetary aggregates. If as the IMF program

envisages the SBP is to become a ‘market follower’ the dependence of

MO on variations in the other monetary aggregates will probably

increase and there will remain no justification for regarding MO as an

exogenously determined variable. As the financial sector is liberalized

MO growth/contraction will be as much under global financial market

pressure as the other monetary aggregates. The IMF should remember

that the production of finance is a capitalist activity (Vodoo theory on

the whole ignores this fact) and all monetary assets are subject to the

same capital valorization laws. Nothing – absolutely nothing – is

exogenous to the capital system as Meszaros so often asserted

(Meszaros, 1995). The capitalist state is an agent of capital. It has no

power to act from outside the capital system. Since capital markets are

forever subject to irrational expectations interest rate structures are often

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‘distorted’ not neatly in tandem with gross profitability rates and long

term rates following short term rates. These ‘distortions’ are reflected in

all monetary aggregates – not just M2 and M3.

The IMF takes no account of the impact of jacking up the usury rate

structure on the real wage rate. The word ‘wages’ does not appear

anywhere in the EFF proposals. As we have seen the primary aim of the

IMF’s program is to reduce Pakistan’s national sovereignty and a

reduction of national sovereignty requires an increased

disempowerment of the masses for which falling absolute poverty levels

cannot compensate. Reducing real wages is a means for mass

disempowerment through ensuring that all the gains of factor

productivity growth (if any) are transferred to domestic and national

usurious and gharar controllers and to the imperialist powers. De-

sovereignization of poor states requires intensification of debt servicing,

growth of both public and private debt and subjection of the

‘independent’ central banks of these countries to the authority of global

financial markets, surveillance agencies (including IMF) and the Fed.

This real aim of the IMF is concealed in the IMF’s discourse about

‘structural adjustment’ which is erroneously seen as a financial and not a

real sector phenomenon.

The third policy instrument in the IMF package mandates linking the

nominal exchange rate to REER (and also implicitly the fictitious

equilibrium Effective Exchange Rate ERER). Empirical studies have

shown that REER is determined by terms of trade, trade openness, net

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capital inflows, government consumption and workers’ remittances.

Total relative factor productivity is also seen as a determinant but since

it is measured in response to the US it is meaningless (Janjua 2007,

Hyder et al, 2000).

Trade openness leads to REER depreciation as does a decline in

terms of trade. Increase in government expenditure also contributes to

real exchange depreciation. As against this net capital inflow and

workers’ remittances inflows lead to an appreciation of the Pakistani

Rupee. The impact of gross domestic capital formation in Hyder’s

estimation is ambiguous and statistically insignificant in one estimation

and marginally significant in the other. Hyder estimates wide

fluctuations in REER for both the short and the long run (Hyder et al.

2006, pp. 246-247, 250-251).

It is evident that none of the REER’s determinants (except perhaps

government expenditure) is under the control of Pakistan’s government.

The government can do nothing to improve our terms of trade,

remittance inflows or trade openness. The IMF has mandated in the EFF

2019-23 that no further import restrictions will be imposed during the

period and in NTB’s will gradually be phased out. Tying the nominal

exchange rate to REER amounts to abandoning the exchange rate as a

policy variable and surrendering our current and capital accounts to the

tender mercies of oligopoly dominated global money and capital

markets. Given the frequent fluctuations of REER in response to global

market trends over which we have no control we can only expect

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arbitrary fluctuations leading to catastrophic macroeconomic upheavals

in our national exchange rate. During Imran Khan’s rule the rupee has

depreciated from about 105 to 159 per US dollar (September 2019).

In April 2015 the IMF prepared its macroeconomic projections for the

EFF program at a rupee-dollar exchange rate of Rs141=$1. The IMF must

be surprised at this massive devaluation of the succeeding month. Will it

redo its calculation (especially of debt sustainability)? It is significant

that the EFF papers provide no forecasts for REER or of the nominal

exchange rate (let alone the fictitious ERER) for FY2020 to 2023. An

annual double digit devaluation throughout the program period is not

an unlikely outcome. The program provides no measures for controlling

the systemic overshooting/undershooting its presumed ‘equilibrium’

level periodically. Nor does it take into account the possibility of

massive unexpected foreign exchange variation shocks on the national

economy – measures such as those taken by China, South Korea and

Malaysia to which the IMF has not objected. There is no reason to

believe that linking the nominal exchange rate to REER will stabilize the

macroeconomy – quite the contrary it will increase exposure to

unforeseeable and uncontrollable foreign currency market shocks. The

disastrous impact of accelerated devaluation on the price level is also

passed over silently. The EFF papers also pay no attention to the impact

of necessarily irrational expectations (both national and global) on the

determination of REER. Capital controls to stabilize the exchange rate –

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approved by the IMF in the case of China and South Korea in the recent

past – are a strict “no-no” in the EFF program.

The IMF also does not recognize that stable nominal exchange rates

have proved to be a pre-requisite for both export and investment growth

through the long boom period enjoyed by the Asian Tigers and China.

The IMF does not recognize that there is no necessary link between

changes in the exchange rates and comparative cost structures. It does

not recognize that changes in the domestic cost structures in response to

changes in REER do not always move in the anticipated (‘right’)

direction. The ‘stickiness’ of domestic price and wage structure is not

recognized. As we have seen in the case of Pakistan the relationship

between productivity growth and REER is indeterminate and

ambiguous. There is no reason to behave that productivity growth will

respond positively to changes in REER and of course changes in total

factor productivity of Pakistan’s major trading partners (US, Europe,

Saudi Arabia, UAE, China) are not in the least effected by changes in

Pakistan’s REER. To assume that adjusting the nominal exchange rate to

changes in REER will contribute to factor productivity growth is pure

folly. What can be said with certainty is that linking the nominal

exchange rate to REER will almost certainly increase the volatility of

domestic price/cost and revenue structure and enhance the uncertainty

and riskiness associated with investment.

REER in any case an inadequate measure of global competitiveness

since it is based on purchasing power parity, theory which presumes

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that the commodity composition and the tradable to non-tradable

balance of Pakistan and her major trading partners (US, EU, China, the

Gulf countries) is identical – a manifestly absurd presumption.

The relationship between exchange rate, usury rate and price is

multidimensional. Variation in global usury rates as they effect

Pakistan’s REER can be perverse. Similarly global commodity price

movements can also impact REER to produce unforeseen negative

consequences. This is also true of global equity price variation which can

cause wide fluctuations in REER. None of this is taken into account in

the EFF analysis.

It is simply not true that depreciation of the currency in response to

REER fluctuations is sufficient to correct balance of payments (or

balance of trade) deficits. This depends on the demand elasticities of

exports and imports (which in the case of Pakistan are low) and the

impact of this devaluation on the capital account (which in the case of

Pakistan is small and uncertain). On the other hand depreciation leads to

a blooming of debt both domestic and global and debt service charges.

In Pakistan devaluation has also been a factor in fueling inflation and

depressing real wages.

Accelerated depreciation of national currencies is often deliberately

crafted by imperialist governments in collaboration with local and

global banks and financial instruments. In the 21 st century this has been

the case in Turkey, Indonesia, Brazil, Zimbabwe, Venezuela etc. where

devaluation has been used as a weapon by imperialist states and global

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finance to achieve desired regime change surrendering the foreign

exchange rate to global market forces in providing a weapon to

imperialist powers to use wherever they wish to try to destabilize the

political system. Pakistan’s vulnerability in this regard is very great

given the imperialist desires to destroy our nuclear capability.

According to EFF estimates baseline external debt is to grow from

30.17 percent of GDP during FY17 to FY19 to 42.52 percent of GDP

during FY20 to FY23. The external debt to annual exports earnings ratio

is expected to average 313.35 percent during 2016-19. This is expected to

rise to 331.25 percent during FY20 to FY23. Gross financings are

expected to rise from $21.8 billion on average during FY16 to FY19 to an

annual average of $25.70 billion during FY20 to FY23. It is thus clear that

the aggregate volume of external debt and the debt service serving will

continue to rise during the program period.

Moreover the debt projections are of course entirely speculative and

therefore subject to very wide margins of error. The IMF itself recognizes

that these estimates are ‘subject to high uncertainty’ (IMF 2019, p. 42)

and everything depends on China, Saudi Arabia and the UAE sticking to

the (presumed) commitment to maintain ‘their exposure well beyond

the program period’ (IMF 2019, p. 42). China, Saudi Arabia and Emirate

commitments have of course nothing to do with the EFF program. These

countries did not stipulate any macroeconomic conditions in providing

bilateral funds and a violation of IMF conditionalities will in all

probability not affect bilateral financing from these countries which

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depends mainly on Pakistan’s support for their regional geopolitical

strategies – it is only the trivial financing from multilateral imperialist

agencies (the World Bank, Asian Development Bank, Islamic

Development Bank) and perhaps the EU that is subject to IMF program

performance.

The manageability of external debt is premised on unrealistic

assumptions in the current account deficit, non-debt capital inflows and

economic growth expectations. Equally crucial is the assumption that

non EFF credit inflow from China, Saudi Arabia and the UAE will

continue to flow in well beyond the program period thus lowering gross

financing needs. No account is taken of the vulnerability of external debt

stock and flow to interest rate, global price and exchange rate shocks.

External debt of most poor countries has been rising rapidly since the

crisis years of 2008 and 2009. This is because it is in the interest of the

financial markets to fuel poor emergent economies indebtedness as a

means for portfolio diversification and achieving arbitrage advantages –

so short term and speculative financing has risen while DFI flows have

stagnated.

The global economy is subject to frequent violent upheavals which

are invariantly transmitted from the core economies to the periphery. It

is dominated by monopolistic markets and subject to imperialist policy

control. Competition within it cannot mimic perfect competition for

perfectly competitive markets have never existed and can never exist

within capitalist order. The fragility and vulnerabilities of global

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markets is currently being enhanced by the ongoing struggle between

American paleoconservatism and neoliberalism. The national capacity

for absorptions of global shocks declines drastically as exposure to

global markets and subjection to imperialist policies increases. Moreover

there is no evidence to show that exposure to global markets increases

the efficiency or equity of national market operations.

Globalization requires a continuation of the massacres and plunder

that characterizes its history – Red Indians, Vietnam, Afghanistan, Syria

– it is an artifact of legislative and political construction especially

designed to serve the interests of imperialist powers and the IMF is an

instrument for the execution of imperialist financial policy – a sub-office

of the US state department. Trade and financial liberalization necessarily

erode national sovereignty. Vodoo theoretical and policy discourse are

deliberately crafted by imperialist agencies such as the IMF to justify

continued exploitation and victimization of poor peripheral economies.

Surrender to globalization necessarily mean (a) increased ineffectiveness

of state policies in peripheral capital economies (b) loss of market

competitiveness (c) rising distributional inequalities (d) enhanced capital

flight during periods of upheaval and (e) intensification of de-

stabilization tendencies in the macroeconomy. The truth of the above

statement can be verified with reference to Pakistan’s experience which

has been liberalizing/globalizing since when Benazir Bhutto first took

office in 1988. Entering EFF 2019-23 is sliding down further on this

slippery slope – one stage near committing national suicide.

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 And what is the IMF offering for thisre-colonization of Pakistan – for

turning Pakistan’s rulers into satraps of the American empire? The EFF

envisages an immediate transfer of about $1 billion at the

commencement of the agreement and another $5 billion as a quarterly

basis on the basis of IMF quarterly and semi-annual review reports.

Pakistan’s gross external financing requirements for the program period

amount to $109 billion (approximately). Thus the direct IMF financing

amounts to 5.8 percent – a share that cannot realistically be described

even as ‘peanuts’ or ‘trivial’. Pakistan’s gross external financing needs

have been estimated by the IMF at $25.6 billion for FY20. For this year

Saudi Arabia provided $6.3 billion, the UAE $6.2 billion, China $3 billion

– i.e. total of $15.5 billion. The IMF’s $1 billion loan is completely

dwarfed by the Saudi Arabia and the Emirate loans which each have

provided six times as much financing for FY20 as the IMF. The IMF’s

loan amounts to 3.9 percent of gross financing requirements for FY20.

Financing from China, the UAE and Saudi Arabia is not conditional on

compliance with IMF structures. Hafeez Shaikh’s parroting IMF

projection that $38 billion will be provided by international financers

during the program period is of course just “pie in the sky” given the

uncertainties of global political and economic developments.

The sad fact is that Imran Khan has sold Pakistan’s economic

sovereignty to gain imperialist support for his tottering regime and in

the interests of the capitalist elites which dominate his government and

his party.

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F. The Alternative
We are Islamic revolutionaries and committed to an overthrow of

global capitalist order. It was toward a religious social formation –

Christianity – that capitalism originally subverted and it is incumbent

upon religious – Islamic – forces to rescue man from the corrupt,

exploitative world that capitalism has created.

But overthrowing capitalism will be an arduous long term historical

process – after all it took capitalism about four centuries to

comprehensively deconstruct the Christian life-world and we in

Pakistan are disadvantageously placed to struggle against global

capitalism. This is so for two reasons. Though significant

demographically, Pakistan is a small, peripheral national economy with

minimal impact on global transactional structure. Secondly, within

Pakistan Islamic political forces are weak with tenuous organizational

links with their socially strong mass base. Their ability to influence

national macroeconomic policymaking is negligible. Nevertheless we

feel it to be our duty to spell out brief details of a macroeconomic

strategy which can safeguard Pakistan’s national strengthening and

reduce the imperialist stranglehold on our political and economic

policymaking process. We feel this is all the more necessary because no

secular party has opposed Pakistan’s subordination to imperialism

through this IMF program.

F.1. Objective of the Alternative Program
Our fundamental objection to the IMF program is that it deprives

Pakistan of its national sovereignty and articulates a macroeconomic

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strategy which enhances the powerlessness of the mukhliseen-e-deen

and the mustadafeen. The primary objective of our proposed strategy is

to enhance Pakistan’s national power and eliminate the powerlessness of

the mukhliseen-e-deen and the mustadafeen. Economic growth or

reduction in (absolute and relative) poverty does not necessarily

translate into national power or the power of the mustadafeen and the

mukhliseen-e-deen. Witness the abject powerlessness of all oil rich-Arab

states, vis-à-vis Israel. Moreover, Syedina Isa and Syedina Muhammad

(peace and blessings of Allah be upon both our masters) were the

poorest of the poor but they have had proved to be the most powerful

forces in mankind’s history. Poverty is a virtue in both Islamic and

Christian order and Syedina Isa (upon whom be peace and Allah’s

blessings) has said “What will it benefit a man if he gains the whole

world but loses his soul.

Economic wealth which does not translate into an augmentation of

national power and the power of the mustadafeen and mukhliseen-e-

deen is a weapon in the hands of the enemy. Our economic strategy is

therefore focused on the augmentation of national power and the power

of mustadafeen and the mukhliseen-e-deen.

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F.2. Militarization of the Economy
Pakistan faces a very serious existential threat today from India,

America and Israel. Hindutva’s dominance over Indian society and

politics should be seen for what it is – an epochal permanent

phenomenon. Secular forces have been comprehensively routed in

Indian society and politics and will never again achieve a comeback.

Annihilating Pakistan is the primary objective of Hindutva politics – an

objective the abandonment of which means the annihilation of Hindutva

itself. Hindutva is the Nazisation of traditional Hinduism. We must

remember that Nazism could only be defeated by war. We must prepare

to defeat Hindutva through armed struggle and conquest.

America and Israel are Hindutva’s natural allies. Their animosity to

Pakistan is fueled by their intentions to destroy our nuclear capacity and

both America and Israel have established spy networks and espionage

systems sabotaging Pakistan’s polity and society. Defense against this

continuous imperialist onslaugh also requires a militarization of the

economy.

Since the advent of liberalization (i.e. after 1988) our defense

spending especially in conspriction to India and Israel has been trivial

and the IMF calls for its virtual stagnation during the EFF program

period. This amounts to committing national suicide.

Militarization of the economy requires the immediate introduction of

mass consumption and the institutionalization of a people’s army. It

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must be stressed that the survival of Pakistan – and the liberation of

Kashmir – depends crucially on our ability to fight a protracted people’s

war in which every Pakistani is armed and organized to combat the

enemy. Institutionalized military cooperation with Iran, Afghanistan

and Turkey is vitally important in this respect as such cooperation

would give us geostrategic military depth. A people’s army armed to the

teeth is the only deterrent to imperialist sabotage and Indian aggression

as the expansion of Afghanistan, Vietnam and Venezuela have shown.

The structural change that we seek in the economy is the integration

of all major sectors with military production and consumption.

Pakistan’s dependence on imperialist sources for weapons procurement

is alarmingly high. We need to be completely self-sufficient in small

arms production and in the production of anti-aircraft weaponry. We

need to at least double the size of our woefully under funded nuclear

development program.

Militarization of the economy requires a major expansion of the

capital goods industries which have suffered neglect for the last seventy

years and this is a major cause of our technological backwardness. All

capital goods industries (including the ICT industries) must be owned

and operated by the military and their growth must serve as the major

propeller of output and employment growth throughout the economy.

F.3. Macroeconomic Stance
Initiatives for militarizing the economy will of course be vehemently

opposed by the metropolitan of imperialist countries and their Pakistani

quislings – but it may not necessarily be opposed by regional powers or

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by China Saudi Arabia loudly applauded Pakistan’s acquisition of

nuclear capability and China is actively aware of Pakistan’s role as a

deterrent to Hindutva expansionism. Nevertheless imperialist hostility

will be profound and we may expect the imposition of escalating

sanctions over the medium to long run (although these are rarely

prohibitive as is shown in the case of both Russia and Iran). Some

sanctions on technological imports are already in place and the good

news is that CSR funding has almost dried up. We must learn from Iran

how to effectively cope with western pressure and foreseeable sanction.

We therefore propose a reorientation of the macroeconomic strategy

to focus attention on the growth of productivity within the domestic

economy while deliberately crafting reduced dependence on foreign

capital, foreign trade and imperialist economic support. Stimulus should

be provided principally for the growth of domestic consumption and

investment and the de-incentivization of flows of (public and private)

foreign capital. Domestic cost structures – and not international prices –

should be seen as a basis for investment decisions and reducing annual

budget deficit should not be a primary concern. Instead government

expenditure must be guided by its impact on factor productivity growth.

Government’s current expenditure must be ruthlessly cut. The existing

34 odd federal ministries must be reduced to ten and a concomitant

reduction should be achieved in the size of provincial and local

administration. The government surveillance machinery –monitored

and overseen as it is by imperialist powers – should be restructured

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down to focus exclusively on India, America and Israeli espionage

activities. There must be a major expansion in the public (including

military) investment from its existing miserable level. The government

must accept its responsibility to serve as the employer of the last resort.

A key component of the domestic demand stimulating

macroeconomic strategy must be the promotion of the halal economy –

consisting of over 95 percent of local business and accounting for a very

large share of total employment. Profits of these businesses should not

be subjected to tax and tax monitoring and surveillance mechanisms

currently in place should be comprehensively dismantled. These

businesses do not rely on usury or gharar. Alternatives financing and

alternatives to usury and gharar financing must be developed to

facilitate the expansion of the halal sector – Islamic banking does not

have this purpose, its loan portfolio is heavily monopolized and its

operations have become thoroughly integrated into usury and gharar

markets. It serves as a conduit for the transfer of trillions of Rupees from

Pakistan to America and Europe.

Monopolistic tendencies are growing rapidly in Pakistan’s urban

economy – especially evident in FMCG trade, opening of malls,

franchising and restaurant business. This “crowds out” and seriously

disadvantages the halal sector. Controlling monopolistic tendencies –

and especially prohibiting mall based entertainment businesses

(especially fawahish) can be a primary means both for discouraging

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conspicuous competition and for enhancing efficient pricing in

accordance with real production costs.

F.4. Foreign Trade
Pakistan’s export to gross production ratio is low and the export

portfolio can be described as structurally deformed in that despite

seventy years of industrialization the share of technology intensive

goods in Pakistan’s export portfolio remains miniscule. It is necessary to

identify and incentivize export champion firms (including some in the

halal sector) that can rapidly increase market share in the right (i.e.

technology intensive) goods in the right (i.e. Iran, Turkey, African)

countries. So targeted (as against liberalized) export promotion policies

require joint venturing and the establishment of bilateral supply chains

with carefully chosen investment partners in targeted countries –

Malaysia, Indonesia and perhaps Thailand can also be included in this

group.

As the experience of the Asian Tigers, China and Japan have so

graphically shown the success of a targeted export promotion policy

depends crucially upon successful import substitution. Export

expansion and import substitution are two sides of the same coin. A

successful import substitution policy is much more than a stimulus to

output growth. It is a means for achieving national technological

upgrade. A successful import substitution policy requires an economy to

move up its production structure from low to high technology intensity

levels. Successful import substitution is indispensable for capital goods

sector growth. This is the common lesson from the American, German,
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Japanese, Soveit Chinese and Korean experience. Liberalization kills the

ability of an economy to import substitute. Pakistan’s import substation

program of the 1950s and 1960s did not fail because it led to (largely

imaginary) ‘welfare losses’ for the consumer but because it failed to

achieve a technological upgrade of our production structure. TheIMF

program is suicidal for Pakistan because its implementation will impede

factor productivity growth and technological upgrade of our economy.

A targeted export strategy necessarily requires the support of a

targeted protectionist regime – this has been the experience of all

metropolitan and emergent economies during the initial

industrialization stage – Britain, Netherlands (during the colonial

period), America, Germany, Japan, the USSR China and South Korea.

The WTO stranghold limits the scope for the use of tariffs as a

protectionist device, it must be remembered that WTO is a dying

organization and Trump may well kill it during his second term. We

must be ready to explore the scope for selective tariff escalation as and

when the opportunity arises (especially in the context of FCMG trade

and trade in services). We must learn from China the adroit

manipulation of non-tariff barriers (which the IMF program prohibits) to

serve our national purposes and of course we must immediately return

to a fixed exchange ratio regime. Manipulating NTBs necessarily

requires protracted negotiations with our selected trade partners and as

far as possible these negotiations should involve companies in the

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importing countries likely to be effected by our and our partners’ NTB

regime changes.
F.5. Exchange Rate and Polices
At the time of independence the rate of exchange between the

Pakistani Rupee and the US dollar was Rs.3.31 for one US$. From 1947 to

1982 we remained on a fixed exchange rate regime. The managed float

system was introduced in the first Peoples’ Party government in 1989-90

and except for eleven months during 1998-1999 (in the immediate

aftermath of our nuclear explosion) a “dirty float” system remained

operative until May 2019 when the IMF forced us to switch to a “free”

(i.e. oligopolistic, speculative) market determined exchange rate system

leading to a catastrophic devaluation of the Rupee over a few months.

The fixed exchange rate system served the Pakistani economy well.

During the three decades (1947-1981) of its existence inflation remained

exceptionally low, growth relatively high and there were several spurts

of investment growth. Both the capital and the current account were

stabilized and Pakistan did not face an external indebtedness problem. It

was American sponsorship of the Benazir Bhutto government which

enabled the IMF and the World Bank through their Structural

Adjustment and Financial Sector Adjustment Loans (FSAL) programs to

force exchange rate liberalization.

The consequences have been disastrous. Growth rates have fallen.

Inflation has risen. The current account deficit has ballooned. External

indebtedness has become a nightmare.

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 The consequence of linking the exchange rate to speculatively

determined global market rates has been truly catastrophic. Growth

rates are at the lowest level in Pakistan’s seventy-two year’s history.

Inflation is in double figures and likely to remain in double figures

throughout the program period. Real wages have fallen dramatically.

Usury rates have skyrocketed. Investor confidence has plummeted.

Unemployment and under-employment is growing rapidly. Factories

are being closed all over Punjab and Sindh. The pattern of income and

wealth distribution is becoming more and more skewed.

Adopting a market based exchange rate regime makes no sense at all.

The price elasticity of our import and export demand is low. Global

capital flows are minimally influenced by our macro-fundamentals.

They are entirely politically determined by imperialist policy changes

vis-à-vis Pakistan. Devaluation feeds the ballooning of the rupee, value

of external debt and thus leads to an increase in the current account

deficit. Adopting a market determined exchange rate system is a

deliberate means for accelerating de-stabilization of our economy.

All democratic governments have supported the abandonment of the

fixed exchange rate regimes. This is because Pakistan’s secular political

parties are dominated by plutocrats – agents of imperialism – and the

operation of the floating exchange rate regimes have facilitated capital

flight in which Pakistan’s plutocracy – both business and political – is

heavily involved. Capital flight has accelerated since Benazir’s first

government took office in 1988. Accurate estimates of total capital flight

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from Pakistan during 1988-2019 are not available but it undoubtedly

amounts to hundreds of billions of dollars. FTAF surveillance does

nothing to moderate this flow (which is quite legal according to

capitalist law) and the Imran Khan’s government despite its tall claims

of “bringing back looted wealth” has not been successful in bringing

back one cent of this money. Its amnesty schemes show that the effort to

“bring back looted wealth” has clearly been abandoned.

An Islamic government will immediately adopt a fixed exchange rate

system and impose strict capital controls on both the current and capital

accounts of our balance of payments. It is pertinent to say that the IMF

approved of the imposition of capital controls by China in 2016 and 2017

and by several East Asian countries in the wake of the 1997 crisis in that

region.
F.6. Monetary Policy
Market based monetary policy was first introduced in the early 1990s

under IMF and World Bank pressure (especially the implementation of

FSAL measures). It is the principal source of the growth of public sector

domestic debt; the growth of government’s indebtedness and the loss of

the state’s control over the monetary system. From 1974 to 1991 we

operated a credit planning system in which the SBP determined both

changes in the supply of money and credit of Usury rates charged to

different sectors were also mandated by the SBP. All banks – except

foreign banks – were nationalized and the Pakistan Banking Council

ensured that operation of the banking system including that of the SBP

served to facilitate growth. During Zia’s era (1977-1988) the system

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worked very well with high growth, low inflation, enhanced financial

sector confidence, investor confidence upsurge and manageable

indebtedness (both domestic and external). The system was abandoned

by Benazir Bhutto and Nawaz Sharif to facilitate capital flight from

Pakistan and to accommodate imperialist policy pressure being exerted

by the IMF and the World Bank.

We call for a nationalization of all banks (including Islamic and

foreign banks) and non-bank financial institutions. We demand the

immediate implementation of the Tanzeel-ur-Rahman Commission

report of 1979 on the elimination of usury from the financial system.

This calls for severe restrictions on money market operations and end to

SBP subservience to global money markets (which the IMF calls central

bank’s independence). We demand a recreation of the Pakistan Banking

Council to ensure that the principle purpose of monetary management is

facilitating the type of growth which leads to the empowerment of the

mustadafeen and mukhliseen-e-deen. The introduction of the Tanzeel-

ur-Rahman recommendations will also involve major restrictions on

gharar (stock market) activities.

As Tehreek-e-Labbaik we are irrevocably committed to an

elimination of all usurious and gharar transactional forms from the

Pakistani economy but abolishing usury/gharar is abolishing capitalism

itself and must therefore be a long drawm historical process. It must be

stressed that the growth of Islamic banking and finance are no means for

achieving this (the Tanzeel-ur-Rahma commission did not recommend

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the establishment of private and public sector Islamic banks). Quite the

contrary Islamic banking facilitates the integration of Sharia compliant

transactions into capitalist markets and thus provides a basis for the

Islamic legitimation of capitalist order (in the same way as Protestant

apologetics legitimated usury transactions on Christian grounds in the

sixteenth and seventeenth centuries in Europe). Trillions of dollars are

being transferred from Muslim countries to global gharar and usury

markets in metropolitan imperialist countries. Therefore Islamic banks

must be nationalized and integrated within a unified tamveeli system by

Muslim countries which seek to promote their national self-reliance.

Implementing the Tanzeel-ur-Rehman recommendations is a first

step in the direction of limiting usury and gharar operations. The micro

foundation of the usury system can be eroded by the gradual

development of a mass based tamveeli system managed by the mosques

and madrassahs (as a quasi-public sector operation) based on channeling

the savings of the mukhliseen-e-deen to profitable investment channels

through an expansion of musharika and mudaraba transections. This

can provide a basis for a significant expansion of non-debt money within

the economy – the experiences of Hezbollah, Hamas, Sirikat-e-Islam and

Dar al Arqam can be drawn upon and also the progress made by the

Islamic regime in Iran for limiting the scope of usury transitions.

Tehreek-e-Labbaik will actively support the development of a mass

based tamveeli system in Pakistan.

E.7. Debt Management

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 As of June 2019 Pakistan’s external debt was composed of (a)

commercial bank borrowings of 11.2 percent (b) bonds of 8.5 percent (c)

loan from China 18.5 percent, Arab countries 10.1 percent (d)

multinational (ADB, WB, EDB, IDB, IFAD, NURAID etc.) loans 39.7

percent and Paris Club loans 13.2 percent (major donors’ Japan $ 5.7

billion, France $1.6 billion, Germany $1.4 billion, America $1.3 billion).

Total pay off of this amount during the program period is estimated at

$37.9 billion (Paris Club $29 billion, China $7.5 billion, Arab countries

$8.3 billion, multinationals $6.1 billion, banks $7.5 billion, IMF $5

billion). Despite this reduction in existing outstanding debt, external

financing requirements are expected to increase by about 9 percent from

FY19 to FY23. This means a rapid growth in external indebtedness as the

total volume of external borrowings skyrockets throughout the program

period.

Iceland and several Latin American countries (Ecuador, Argentine,

Bolivia, Venezuela) have from time to time successfully re-negotiated

their debt obligations for both public and private sector creditors. Audit

of foreign debt enabled both Argentina and Ecudor to write of an

significant proportion of odious debt institute orininal charges against

world bank ficials uln had sanctioned it leading to their expulrion from

there corectnesc. and Musharraf’s government successfully negotiated a

major program of debt repayment scheduling in the early 2000s. Debt

default is a common routinized phenomenon in capital and money

markets and many mechanisms have been institutionalized to deal with

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it. Pakistan’s external outstanding debt is trivial in comparison to the

global debt volume – about $80 billion out of at least $10 trillion

(approximately). A total cancellation of Pakistan’s debt will not even be

noticed in global markets and imperialist treasures. Pakistan’s external

debt is not even a drop in the ocean of global debt.

Our government will immediately enter into negotiations with all

public and private creditors to re-negotiate repayment terms on the basis

of a rigorous audit of all external debt contract – the American

government should probably be excluded from these negotiations as its

lending to Pakistan has always been of a political nature its first target

was the Nizamuddin government of 1953. In these negotiations we

should seek (a) a complete cancellation of interest charges on external

borrowing (arguing that usury payments are forbidden in both

Christianity and Islam), (b) a significant write off of annual repayments

of principle and linking of debt servising charges to foreign exchange

earnings (exports and workers’ remittances). These negotiations should

be preceded by a complete moratorium on all external debt servicing for

FY20. External debt servicing charges for FY20 amount to about Rs.1.5

trillion. Gross revenue receipts for FY20 would then be increased by

about 44 percent. This money should be used to increase employment

generating public investment and enhanced subsidization of the gas,

electricity and stable food sector and military buildup.

There have been several successful experiences of external debt

reduction. In the recent past Iceland and Ecuador and Argentina and

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Bolivia have successfully negotiated substantial write offs of their debt

by their international creditors. The most important success stories of the

unilateral cancelation of debt are Cuba (1898 and the early 1960s), the

USSR (1918-20), China (1950) and Vietnam (French debt 1975). Since we

are a Muslim country, the chances of achieving a significant reduction of

debt obligations are minimal through negotiation as far as the Paris Club

countries and the imperialist multinational agencies are concerned. On

the other hand serious negotiations with China and the Arab countries

(which account for about a third of our existing outstanding external

debt portfolio) for a significant reduction may lead to positive results,

provided we play our political cards carefully. Many commercial

lenders (and it must be remembered that 90 percent of ‘commercial

lending’ is by Chinese banks and financial institutions) may be expected

to take a realistic view and agree to debt reduction and/or to a

conversion of debt to equity financing in joint ventures.

Thus we estimate that of the $86 billion external debt about $31

billion (loans from China, both public and commercial and from the

Arab countries) can be subjected to negotiate settlement and the

settlement achieved can be a basis for negotiation for debt reduction

with the imperialist multilateral agencies.

The imperialist multilateral agencies and the Paris Club lenders are

extremely unlikely to respond positively however. This is because we

are a Muslim country and Islamophobia and racialism hold Western

societies and government in a vice like grip. Nevertheless the

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imperialists probably are not in a position to send in an occupation army

to collect their debts – they have not been able to do so even in

Venezuela, North Korea and Iran. They will probably respond to the

imposition of a debt payment moratorium by restricting our access to

global public financing and private capital markets. This may be

followed in due course by the imposition of periodically tightening

international trade sanctions.

The experience of Russia, Iran and North Korea have shown that

despite imperialist media propaganda sanctions are rarely effective. In

1998 when we exploded our nuclear device sanctions were immediately

imposed upon us by the imperialists and remained in place during 1998-

2001. During that period the economy grew robustly, inflation was

almost non-existent and the rupee remained solid. Pakistan is not a

banana republic and though sanctions will create some pain it will

probably be much less than the pain imposed upon our masses by the

subjugation to global market price structures and imperialist policies

that the IMF has mandated. Less than seven percent of national

production is exported, less than fifteen percent of national consumption

is import sourced. DFI and PFI are trivial components of gross capital

formation. The share of external sector public financing in investment is

miniscule. The real economy is not dependent on the external sector and

effective import substitution can further reduce this dependence.

Pakistan is thus in a strong position to absorb sanction shock.

Disengaging from the global economy can have long term benefits for

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the global economy is teetering on the verge of a major crisis and subject

to exceptionally high levels of vulnerability and uncertainties. Countries

which are least integrated with global markets are best able to absorb

shocks transmitted from panicked financial and commodity markets. At

this stage of capitalist development a nationally self-reliant

macroeconomic strategy must be adopted to stave of the havoc created

by turbulently disequiliberating global market forces. Building a

nationally self-reliant economy in a peripheral country such as Pakistan

is also a small first step towards our eventual goal of de-constructing

global capitalist order – a step which is already being taken by the

Islamic regime in Iran.

Domestic public debt is very high, currently estimated at about Rs.20

trillion and arising rapidly due to usury rate escalation and accelerated

depreciation of the Rupee. About 60 percent of this consists of short term

government borrowings from SBP and from commercial banks. The rest

is sourced by national saving certificate scheme borrowings from the

masses. A re-profiling of this debt – as the IMF recommends – makes no

sense for the yield curve is ‘normal’ and usury rates. On long term

borrowings are higher than on short term borrowings. Borrowings from

the SBP are purely ‘fictitious capital’ providing a basis for the creation of

debt money through Treasury Bill purchases and sales. During the credit

planning period (1974-1992) government borrowings from the SBP were

determined by the development (public investment) needs of the

economy. Usury rates on government borrowings from the banking

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system were usually negative in real terms – averaging about 2 percent

during 1975-1989. We propose that government borrowings from the

SBP – transfer of financial resources from one branch of the government

to the other – should be costless and be determined by the development

financing needs formulated in a medium term credit plan for the next

quinquinium.

Borrowings from commercial banks and other financial institutions

by the government should be re-structured on the basis of

modaraba/musharka transactional forms – with banks’ share of gross

profits being linked to the profitability of the investment of borrowed

funds. This means that bank financing of government current

expenditure be strictly limited. Rates of return on NSS funds should also

reflect public investment profitability but they should not be allowed to

fall below CPI growth in any given year which may mean significant

subsidization of NSS earnings. We also envisage a reduction in public

borrowing requirements as government’s control of the usury structure

increases.

The FY20 budget envisages an expenditure of Rs.2.5 trillion on

domestic usury payments – about 43 percent of government current

expenditure. A significant reduction in debt service payments can be

achieved by introduction of the measures proposed above and thus

money can be used for investment financing and enhanced

subsidization made available for the commodity and service providing

sectors and for military expansion.

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 The scope for constraining government expenditure is limited

although some reduction seems feasible. Thus military service pensions

are forecast to increase by 26 percent in FY2020 and to amount to Rs.330

million. Given the fact that an increasing proportion of ex-service

employees are re-employed at military owned businesses and other

corporation a case may be made for suspending pension payments

during periods of such employment. In any case all pension payment

should be linked to the CPI index. Increase in FY20 in civil pension

payments exceeded CPI growth in that year. There is also scope for a

significant reduction in expenditure on executive and legislative organs

and ministries – which now exceed 36 at the federal level and are also

increasing in size rapidly in the provinces. Expenditure on these

government bodies is expected to increase FY20 – In 31.4 in FY20

percent. Actual expenditure on these bodies in FY19 was 27 percent

higher than original estimates. The public administrative bureaucracy is

bloated and there stables must be ruthlessly cleared of the unproductive

pen pushers and their hangers on who inhabit them. Ishrat Hussain,

former governor of the SBP and currently advisor to the PM on

institutional reform has proved to be totally inefficient in revamping the

public service, both at the State Bank and at the federal level – a fifty

percent reduction in expenditure on legislative, executive and

ministerial bodies thus saving about Rs.2.3 trillion for public investment

and subsidization. Some reduction can also be achieved in defense

service expenditure (estimated at Rs.1.15 trillion for FY20), sepoys

140
deployed for the service of officers are an unnecessary burden on the

public exchequer and officers should be asked to pay for their services

themselves.

Despite the savings we advocate an increase in government

expenditure and the maintenance of a budget deficit of between 12 to 15

percent of GDP during the next equilibrium to be financed entirely by

domestic sources. Maintaining a high fiscal deficit during the recovery

period has been the norm by both metropolitan and emergent

economies (America, China, South Korea, and Malaysia), the

inflationary impact of the policies can be mitigated by strict price

controls (appointment of muhtasibs in all commodity and service

markets), introduction of nation’s maintenance of fixed exchange ration

and capital controls and holding down of usury rates.

Some efforts may also be made to increase revenues through

measures such as augmenting the government non-tax income

increasing the corporate and banking sector tax rate to at least 50 percent

and doubling the income tax rate on all non halal income (salaried and

non-salaried) exceeding Rs.1 million annually (at FY2020 prices).

Finally it may be noted that the FY20 budget allocates a sum of just

Rs.470 million (0.006 percent of total current expenditure) for its

environmental program – down from Rs.1.27 billion in FY19 – down 63

percent. Pakistan is facing a very severe environmental threat

particularly with reference to water stress, deforestation and water

pollution.

141
 A major shortcoming of the EFF is the victimization of the

mustadafeen through the gentrification of urban centers – involving

mass destruction of their houses and closure of their means of halal

livelihood. This further exacerbates the environmental crisis. We will put

an immediate end to this mass destruction and ensure rehabilitation of

the mustadafeen and revival of their halal business. Construction of

skyscrapers and malls will be totally banned and serious attempts will

be made to reconstruct Islamic bazaars architecturally. Emphasis will be

laid on promoting the use of alternative energy sources and coal mining

in particular will be discouraged. Publically funded programs for

desalination of water, construction of dams and reforestation will be

launched. Most importantly the environmental impact of all major

enterprises will be strictly assessed and the full cost of environmental

depletion will be laid on them through taxation measures.

E. 10. Alternative Policies: A Summary
Below we summarize these alternative policies.

 The fundamental objective of our policies is to increase the power

of the nation state, of the mustadafeen and the mukhliseen-e-deen

and to safeguard and enhance national sovereignty. Our primary

concern is to reconstruct economic transactions so that they are

instrumentalized for the promotion of the Islamic values-Sbar,

Shukar, Infaq fqar and Jihad. Increasing growth and reducing both

absolute and relative poverty are promoted only to the extent that

they facilitate national empowerment and the empowerment of the

mustadafeen and the mukhliseen-e-deen.

142
 Introduction of mass conscription and the mobilization of a

people’s army and preparation for fighting people’s war.

 Enhanced military cooperation with Iran, Turkey and Afghanistan

and the initiation of joint commads.

 Integration of all major economic sectors with military production

and consumption

 Achievement of self-sufficiency in small arms production,

increased air defense capability and reduction of dependence on

imperialist sources for arm procurement

 Double the size of the nuclear development program

 Military investment in the capital goods industries and all capital

goods industries (including ICT) be exclusively owned and

managed by the military

 Substantial and sustained increase in the military budget

 Preparations to deal with the imposition of sanctions by

imperialist powers

 Focus of macroeconomic policy to be on growth of domestic

demand and productivity rather than on the external sector

 Reduced dependence on foreign trade, foreign capital inflows

(both public and private), de-incentivization of DFI and PFI

 Domestic costs will be taken as reference basis for determining of

prices, not globally market determined usury and exchange rates

 Significant increase in public investment determined by factor

productivity growth

143
 Government to act as ‘employer of last resort’

 Promotion of the halal economy, total tax exemption of its profits.

 Refocusing of surveillance mechanisms on sources of imperialist

and Indian and Israeli espionage.

 Development of non-usurious and gharar financing mechanism

for halal sector financing

 Anti-monopoly measures to be implemented with special

reference to the FMCG sector

 Ban on shopping malls, entertainment industries and franchising

 Identify and incentivize national champion firms (including those

in the halal sector) which have the capability to rapidly increase

technology intensive exports especially in Iran, Turkey and the

African countries

 Promotion of supply chain linkages and joint ventures with

carefully chosen investment partners from Iran, Turkey and

Malaysia

 Promotion and incentivisation of import substituting production

especially in the intermediate and capital goods sectors

 Development of a targeted protectionist regime involving

reintroduction of tariffs where necessary and feasible and adroit

use of an NTB strategy constructed on the bases of mutually

beneficial trade agreements with partner countries

 Adoption of a fixed exchange rate regime. Devaluation is a

deliberate attempt to both de-sovereignize and destabilize the

144
 macro economy. A fluctuating exchange rate regime facilitates

capital flight.

 Impose strict capital controls on both the current and capital

account

 Nationalize all bank and financial institutions

 Abandon market based monetary policy and revert to credit

planning. Market based monetary policy is the principal cause of

public sector domestic debt growth, bad loans in the banking

sector and loss of control of the monetary sector by the state

 Strict subordination of the SBP to the government, revival of the

Pakistan Business Council, allocation of credit and its pricing to be

determined by the SBP/ PBC.

 Implementation of al recommendations of the 1979 Tanzeel-ur-

Rahman report on the financial system

 The imposition of strict controls on the money market and

severance of SBP ties to global money markets

 Restriction on gharar transactions

 Establishing of a Tamveeli system involving Musharka and

Mudarba financing at the mass level to erode the micro

foundations of usury financing and enable the creation and

expension of non-debt money

 Negotiate external debt reduction with both public and private

sector creditors on the basis of audit of outstanding external debt

145
 with a proposal to link principal repayments to foreign exchange

earnings

 Cancel all usurious payments immediately

 Prepare for the imposition of sanctions by imperialist countries

 Conduct strict environmental audit on all mega and medium size

projects in both the public and private sectors and through

taxation impose the full cost of environmental depletion on public

and private sector corporation

 Encourage alternative energy, water purification and de-salination

and reforestation projects through both public and private sector

investment.

146
 Statistical Appendix
IMF Projections

Table A.1. Pakistan: Selected Economic Indicators, 2014/15-2019/20

1/

147
Table A.2. Pakistan: Medium-Term Macroeconomic
Framework, Program Scenario, 2016/17-2023/24

148
Table A.3. Pakistan: Balance of Payments, Program Scenario,
2016/17-2023/24 (in millions of U.S. dollars, unless otherwise
indicated)

149
 Table A.4. Pakistan: Gross Financing Requirements and
Sources, Program Scenario 2017/18-2023/24 (in millions of U.S.
dollars unless otherwise specified)

150
Table A.5. Pakistan: General Government Budget, Program
Scenario, 2016/17-2023/24 (in billions of Pakistani rupees)

151
 Table A.6. Pakistan: Monetary Survey, Program Scenario,
2014/15-2019/20

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