It is not its diktats — whether deliberately diabolical or merely unwitting in nature — that have been blamed by many a country for destabilisation, or even devastation, of its economy, like what Argentina had suffered in 2000–01. Nor is its withholding from Bangladesh the last tranche of the so-called Poverty Reduction Growth Facility scheduled for disbursement in June. It is the sheer audacity of the International Monetary Fund to propose and insist that Dhaka should ink a Policy Support Instrument agreement with it that has sparked and sent a current of outrage mixed with resentment through the country’s intellectual and business grapevine. Why? Because, the instrument introduced by the Washington-based financial agency in 2005 is a set of conditions that a signatory country must fulfil, whether it receives any loan or monetary assistance from the Fund or not. But, what makes this instrument of providing ‘policy support’ more like a weapon of economic policing is the condition that the country must get the Fund’s approval to receive any loan or aid from any country, bloc, or lending/donor agency.
The citizens of Bangladesh who have come to know of the proposal, particularly the economists and the businesspeople who by dint of occupation are more or less knowledgeable about domestic and international economic events and issues, find this PSI clause not only insulting and ultra vires, it is also tantamount to encroachment on the country’s sovereignty.
Mahbubur Rahman, a leading business magnate who heads the International Chamber of Commerce, Bangladesh, has already voiced the business community’s concern over the IMF move by calling upon the government not to sign the agreement as it would ‘compromise the country’s sovereignty by allowing the international agency to act just as a credit-rating agency in relation to Bangladesh.’ His call came at the first-ever high-profile dialogue between business leaders and the interim government, represented by the chief adviser, Fakhruddin Ahmed, the finance and commerce adviser, Mirza AB Azizul Islam, and the chief of army staff, General Moeen U Ahmed, on Bangladesh Economy and Future Perspective held at a Dhaka hotel on Wednesday, the day after an IMF mission had descended on the country reportedly to clinch the deal.
The ICC,B president also asked the government to ‘calculate very carefully the merit of donor assistance’ as a third of the donors’ commitments [including, of course, the PRGF instalment] were not made available in the last fiscal year, in which Bangladesh paid $710 million in interest out of $1.57 billion aid it received.
The business leader’s stance against the PSI agreement was echoed by an eminent economist, Bangladesh Institute of Development Studies research director Zaid Bakht. In an interview with the daily Prothom Alo on Tuesday, Zaid said as a member country we could seek advice from the IMF any time. For that, there is no reason for us to get engaged in a binding relationship. Besides, in his opinion, before signing such an accord, an interim government should consult all sections of people on its necessity.
The IMF is a specialised agency of the United Nations that came into operation in 1947. It does not lend money to its member states for implementing development programmes. Its operations are expressly aimed at facilitating world trade growth and smooth multilateral payment arrangements among the member states, and helping nations keep their currencies stabilised and resolve balance of payment problems by handing out standby loans, the amounts of which vary according to the members’ quota and usually on the condition that the recipient countries must agree to take certain corrective measures. This last provision has often been proved damaging to the interests of the borrowing countries, who usually are developing or least developed countries, and in the interest of the developed countries that contribute to the Fund.
At the moment, Bangladesh enjoys healthy growth rates of export and expatriates’ remittance inflow, said Zaid Bakht. The foreign currency reserve is also satisfactory and, so, the country is not facing any BoP problem.
According to the central bank data, the country’s current foreign currency reserve now stands at around $3 billion, which is enough to meet any exigency. Then, where is the need for us to accept a derogatory package of conditions like the PSI. In the long two years since its inception, only three countries — Nigeria, Uganda, and Cape Verde — have signed PSI agreement with the IMF, which shows a general lack of its acceptability.
Let alone the PSI, in fact, the IMF itself has become an undesirable and harmful body to many countries. Of them, Brazil, Malaysia, Argentina, Thailand, Sri Lanka, and Venezuela have already paid off whatever money they owed to it and then showed it the door, while some others like Indonesia and the Philippines have decided not to take any fresh loan from it and to get rid of it after paying back the money they have borrowed from it at the earliest.
Even the Fund’s parent organisation, the UN itself in a report in 1999 admitted that the number of poor countries taking IMF/World Bank assistance had in fact increased to 48 from 25 in 1971, the year since when the IMF has gradually adapted its rules to floating exchange rates, which ultimately placed a number of states in dire straits, with Argentina being the worst victim, as we had seen during 2000-01. The reasons for poor countries turning poorer after taking money from the IMF/WB were attributed by the report to too harsh and adverse conditions set by them that, on the other hand, helped the multinational companies.
Bangladesh is one of the countries that have been swallowing the monetary and fiscal pills prescribed by this quack masquerading as an expert in economic health. The results are apparent. The jute sector has been thrown to the wolves at the Fund’s behest, despite clear and globally-acknowledged prospect of growth, not to speak of viability, as is demonstrated by India. From a finished jute good exporter, Bangladesh has now regressed to the pre-1947 status of a raw jute exporter. Instead of curing the patients — the state-owned jute mills — by removing the tumours of lack of planning, inefficiency, mismanagement, corruption, pilferage, lack of training and technological updating, mafia operations etc, the Fund had issued an imbecile prescription — to kill them. Naturally the tumours disappeared with their hosts, so did thousands of workers of the mills.
One can mention many similar cases including the skyrocketing inflation and cost of living, acerbating misery of the masses, increasing import of unnecessary and luxury goods at the cost of decelerated industrial growth — all stemming from policies, like the contractionary monetary policy of the Bangladesh Bank, prescribed by the IMF and its cousins like the WB and the WTO to promote free trade and market and economy. But, this freedom also has to be a controlled one, as the developed countries feel that as our big brothers they have the responsibility to regulate and guide us on our road to freedom, step by step. That is why our so-called development partners are always attaching conditions, ostensibly to cure our economy of diseases or to improve its health. And the new surgical instrument the financial instructor has invented is the PSI, to protect us from taking unnecessary loans for unnecessary reasons from unwarranted people.
But, the day after its arrival in Dhaka, the IMF PSI delegation led by its Asia Pacific Department adviser Thomas Rumbaugh experienced a jolt when at a meeting the National Board of Revenue officials straightway rejected its proposal to introduce a joint audit system of tax and VAT. Taken aback, the IMF team expressed concern about achieving the revenue target and was told that the revenue board was right on the track, there was no need for its help.
Thursday, however, proved lucky for the team. It was able to persuade the Bangladesh Bank to continue with the IMF-prescribed contractionary monetary policy to rein in inflation, against the better judgment of central bankers as well as the country’s economists. One wonders whether it was because of the signals being emitted by the finance adviser, who on the same day told a BIDS roundtable that the government was unable to formulate policies independently due to globalisation and other international factors.
‘Sovereignty is curtailed in formulating policies,’ he maintained, as the drawing line between domestic and external policy making has become blurred and as policymakers have to take the international aspects into consideration.Although he faced sharp opposition from a number eminent economists present, including Professor Rehman Sobhan and former finance ministers M Syeduzzaman and AMA Muhith, Mirza Aziz sounded undaunted in his stance servile to the multilateral lending agencies. It makes us apprehend that he may go for the IMF instrument of further bondage. If he does, he should remember that he had been warned against the agreement a number of times and by eminent experts. But, let us hope that at the end good sense will prevail and we will not be put in a cage meant for dysfunctional states.
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