Professional Documents
Culture Documents
Rich states see crises once a decade due to both private- and public-sector
acts. Bad private investments cut GDP growth, as do bad fiscal or monetary
policies as in 2008. The triggers for our crises are not low growth due to
private-sector acts, but oddly, high growth induced by elite rulers. Growth
sustains and doesn’t induce crises if driven by high investment and
productivity via reforms, as in East Asia and Bangladesh where growth lasts
long unlike our spurts of two to three years. Forget East Asia, our investment-
GDP ratio is only 15 per cent against even South Asia’s 30pc average! Our
productivity is low even regionally.
Our growth is fake, driven by high money supply growth and external and
fiscal deficits rigged by rulers who avoid reform. This causes high inflation,
low foreign reserves and a need for IMF loans that demand depreciation, high
interest rates and cuts in twin deficits. This causes a big fall in growth the next
year — coincidentally under a new regime all four times since 2000, which
was then wrongly blamed for them by all, even the last culprit regime. Half of
the 23 IMF loans since 1958 came after a growth of 5pc to 9pc as foreign
reserves fell by 25pc to 50pc despite and due to high growth given low exports.
Even in the much-praised Ayub era that saw three IMF loans, the export-GDP
ratio was only 7pc, peaking at 16pc in the maligned 1990s.
The four regimes since 2000 all left a need for urgent IMF loans for the new
set-ups even without global recessions as the 2008 global and 2022 Ukraine
crises mainly hurt the new rulers. I compared each regime’s crisis via GDP
growth, inflation, interest rate and fiscal and external deficit in their last year,
fall in foreign reserves and rupee values in the last six months and imports-
reserves ratio in the last month. The PTI was responsible for the worst crisis,
followed by Musharraf. The PML-N contributed the mildest one in 2018. So
the PTI inherited the mildest crisis from PML-N but gave back the worst one.
Some IMF policies impose austerity when the poor can’t afford it.
The PML-N and PTI boast about their 6pc growth in 2018 and 2022. Both
were of low quality, driven less by investment, exports and industry and more
by high money supply and twin deficits. The PTI’s growth was more low-
quality as its ratios of investment, exports, industry, tax revenues and twin
deficits to GDP, inflation rate, money supply growth and fall in rupee value
and foreign reserves were generally worse.
When states sink so deep in a crisis, IMF loans are the only rope with which
they can crawl out. The IMF demands to cut the twin deficits and money
supply are a must to end the crises but they will harm the poor. Some IMF
policies are controversial in the extent of their harshness. They impose
austerity when the poor can’t afford it. The shock therapy doesn’t ensure, and
often even harms, long-term growth. So, IMF’s role as the only source of
money and reform pressure via gatekeeping all money flows to poor states
during crises is inept. A better system is possible.