The International Monetary Fund (IMF) last month warned Pakistan of a looming foreign exchange crisis. The strongly worded statement foresaw a depletion of foreign reserves as in 2008, when the country’s government was forced to seek an emergency bailout.
The IMF executive board report made clear that further funding will require unprecedented budget cuts and pro-market “reforms” that will lead to further attacks on jobs, working conditions and living standards.
The report observed that “while some progress has been made, Pakistan continues to face difficult macro-economic challenges as growth remains insufficient, underlying inflation is high, and the external position is weakening.” It underscored the negative impact of “an uncertain global environment and a difficult domestic situation, as well as adverse effects of natural disasters.”
Gross domestic product, adjusted for price changes, has averaged 3 percent growth annually over the past four years and is projected to expand by 3.25 percent for this financial year. This is insufficient to absorb the growing labour force, for the fifth consecutive year, according to the IMF. The report also forecast double-digit inflation by next June.
Foreign exchange reserves had fallen “below adequate levels” to $10 billion by October, reflecting “weak financial inflows and debt repayments”. Pakistani exports have reduced drastically as a result of the downturn in its chief export markets, the US and Europe.
State Bank of Pakistan (SBP) figures released in December also revealed a bleak picture. The SBP said the government held $US63.82 billion (6,233 billion rupees) in external debt, including $7 billion still owing to the IMF from the 2008 bailout. Foreign direct investment (FDI) was in a sharp decline, from a peak of $5.3 billion in the 2007-08 financial year to just $813 million in 2011-12.
The IMF’s reference to “some progress” was to the Pakistan Peoples Party (PPP)-led government’s economic restructuring and budget cuts, implemented as part of its bailout agreement with the IMF. These measures have featured cutbacks in social spending, “flexible” exchange rates and a commitment to privatisation.
These measures have made a shattering blow to the living standards of most people. The many millions affected by the massive floods of 2010 and 2011 have been left without assistance as a result. According to the Sustainable Development Policy Institute, an Islamabad based think-tank, 33 percent of Pakistanis, and 46 percent in rural areas, live in poverty.
The IMF’s prescription is more austerity. “[R]educing the large fiscal deficit is essential,” the report said. It proposed lowering subsidies and price differences, which would drastically raise energy prices. Other measures included privatising “loss making” public sector enterprises, “improving the investment climate, and further trade liberalisation”.
The IMF falsely claimed that these “strong policy measures” would address “vulnerabilities, boosting sustainable growth and reducing poverty”. In reality, Pakistan’s crisis has resulted from the world capitalist breakdown and the country’s chronic backwardness. The implementation of similar policies in Greece, prescribed by the IMF and associated bodies, has already set a devastating example.
The IMF rejected the Pakistani government’s proposed “tax amnesty program,” supposedly designed to bring influential tax evaders into the tax net. With a general election due in May, the amnesty is a concession to sections of the ruling elite that have illegally earned “black money”. The IMF has also insisted on widening the base of the Value Added Tax to increase government revenue, which would result in sharp price rises for essentials.
The IMF refused to release the final instalments, amounting to $1.3 billion, of the last $11.3 billion bailout loan, citing the government’s failure to implement all its recommendations.
The government of President Asif Ali Zardari said it would not ask for a new IMF bailout for the time being. It is desperate to delay any further austerity program that would fuel mass opposition and dash any prospect of re-election in May.
The government appealed to the IMF to defer at least some of the repayment of $1.7 billion due within the next six months. The Dawn reported on December 14 that an IMF team was likely to visit the country soon. Islamabad is hoping that US influence would have a favourable impact on its negotiations with the IMF in the short term.
The Obama administration has agreed to pay $600 million from the Coalition Support Fund to Islamabad for the services it provided in waging war against Taliban-allied militants on Pakistan soil. This is a further sign of Islamabad’s efforts in recent months to mend tense relations with Washington and to further accommodate US imperialism.
Conscious of mounting public opposition to the austerity measures and privatisation, the IMF stressed that “securing broad political support for tax and other reforms is critical”. This was a warning to the ruling PPP, as well as the main opposition parties, the Pakistan Muslim League (PML-N) and Pakistan Tehreek-e-Insaf (PTI), to keep the IMF’s dictates out of the election debate.
The PML-N, which has implemented IMF policies in the past, has no opposition to the austerity agenda. The same applies to the PTI, which has repeatedly stressed that the party is committed to improving the “investment climate” as a means of addressing the fiscal crisis. If these parties pose as opponents of the IMF measures, it is only to divert the anger of workers and the poor.
Whichever government takes office after the next election, it will step up the onslaught on the conditions of the masses.
“This operation has the character of a try-out,” said the G5 force’s commander, Malian General Didier Dacko. According to French army sources, the “territorial control” operation was carried out by 350 soldiers from Burkina Faso, 200 from Niger and 200 from Mali.
Since his election in May, French President Emmanuel Macron has pushed to intensify the war launched by his predecessor, François Hollande, in France’s former colonial empire, amid growing geostrategic tensions between Europe, the United States, and China. On July 2, Macron attended a summit of the G5 states in Bamako. The summit formally inaugurated the new force, which officially includes around 5,000 troops in total furnished by the countries of the alliance.
Macron confirmed that France will not leave Africa and or redeploy its 4,000 troops fighting in Operation Barkhane (the war in Mali), despite the launching of the G5 force. He said France would remain engaged in Mali “as long as it takes” to carry out a struggle against terrorism. He gave no indication of when, or even if, Paris might withdraw its forces.
“I came to Bamako today and went to Gao last month to show you that France will remain engaged as long as it takes,” Macron said in a speech before the French community in Bamako. “Thanks to our engagement, we aim in the long term to accompany and support the national and regional forces,” he added.
Paris faces a significant difficulty, in that it confronts a budgetary crisis. The G5 estimates that its operating costs will run to €423 million in the first year. Macron has announced material and logistical aid from France worth €8 million by the end of the year; the European Union (EU) has promised €50 million, and each G5 member country has committed to contributing €10 million. France is therefore forced to ask for financing from its imperialist allies, principally Germany and the United States.
In the final analysis, the imperialist capitals plan to put the costs of this neo-colonial escalation on the backs of the workers—which Macron made clear by calling for multi-billion defense spending increases while eliminating the special tax on large fortunes. Austerity and slashing cuts to social spending aim to boost financing for wars like the G5 operation in Africa. At the same time, Macron is demanding that the G5 countries, which were already among the poorest in the world even before being devastated by the wars during this decade, to provide large quantities of cannon fodder.
The claim that these sacrifices in blood and treasures are necessary in a struggle against terrorism is a shameless political lie.
The crisis in the Sahel flows from the bloody war for regime change that NATO waged against Libya in 2011, relying directly on Islamist militias as its ground troops. After the fall of the Libyan regime, Tuareg forces that had fought inside the Libyan army returned to northern Mali and backed local Tuareg fighters, including the National Movement for Liberation of the Azawad (MNLA) against the Malian army. This provoked a major crisis in Bamako, where a coup toppled President Amadou Toumani Touré in March 2012.
Initially, Paris tried to remove the military junta of Captain Amadou Sanogo, which it forced to hand over power to an interim government. But finally Paris decided to back the Sanogo junta when it launched its own war in Mali in January 2013—which it nonetheless presented as a war to protect democracy from Islamism.
Since 2013, the French war in Mali has aimed neither to fight terrorism nor to create democracy in Mali. Rather, amid increasingly sharp international rivalries, Paris is preparing major new wars in Africa to protect its imperialist interests, including its control of the region’s vast uranium mines that fuel France’s nuclear plants.
These successive wars have devastated the G5 countries. According to the UN, 5 million people have fled their homes and 24 million people need humanitarian assistance in the region. Even Malian officials kept in power by French troops now feel compelled to confess that the war in Libya had horrific consequences for the region. Malian Foreign Minister Abdoulaye Diop called the Libyan war a “strategic error” whose fall-out was not “well handled.”
As US troops also intervene in Niger and across the Sahel, there are growing differences between the imperialist powers and also with China, whose political influence in Africa is growing in line with its commercial weight. Washington—which is opposed to French demands that African operations function under the aegis of the UN and is reticent to fund French operations—has expressed serious reservations over the G5 force.
Washington has refused to finance the G5 through the UN, particularly under conditions where the Trump administration is trying to slash US payments to the UN, and has announced that it will provide funding directly to the G5 member states. It reportedly plans to provide aid worth €51 million to the five countries and has declared that this money would not go to the UN.
US Ambassador to the United Nations Nikki Haley bluntly criticized the French plans. “They can’t show us a goal, they can’t show us how they’re going to proceed,” Haley told CNN. “If they go back and they show us a strategy, and if it’s something that General [James] Mattis and General [Joseph] Dunford feel like is moving in the right direction, then yes. We will. But right now they’re not showing that, and so it doesn’t make sense for us.”
Amid these Franco-American tensions, the Chinese regime is providing support, on paper at least, to the new force set up by French imperialism. Chinese permanent vice-representative to the UN Wu Haitao declared that it “would be necessary to support this alliance, while taking into account the leading role of the regional powers and the sovereignty of countries in the alliance.” Beijing has also set up its own aid fund targeting the Sahel countries.