Pakistan. IMF pressure termed ‘blackmail’: Govt, masses urged to get foreign debts written off

14 October 2010

KARACHI, Oct 12: Debt is a powerful tool used by creditors to dominate, exploit and plunder indebted third world countries. It is a major obstacle in the way of people’s sovereignty and their economic, social and cultural rights.

This was observed by Stephanie Jacquemont, representative in Pakistan of the Belgium-based civil society organisation, CADTM (Committee for the Abolition of Third World Debt), which is spearheading an international campaign for immediate and unconditional abolition of foreign debts of the third world and advocating an end to the neo-liberal policies implemented by developed countries and international money lenders through strict structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).


Speaking at a press conference along with local civil society organisations at the Karachi Press Club on Tuesday,

Ms Jacquemont urged the masses in Pakistan to force their government to stop repayment of foreign debts as the country was not at all in a position to pay off the debts because of the colossal losses caused by the recent worst-ever floods in its history.

The press conference was part of a 10-day campaign (October 7 to 17) being run jointly by the CADTM and various local civil society organisations in Pakistan for the abolition of foreign debts.

Ghani Zaman of the National Trade Union Federation, Nasir Mansoor of the Labour Party Pakistan, Zehra Khan of the Home-based Women Workers Federation, Mushtaq Shan of the Labour Education Foundation and Shabir Azad of the Sindh Labour Relief Committee were among the local leaders present.

They appealed to all foreign money lenders to write off Pakistan’s debts — roughly $55 billion — to enable it to cope with the dislocation of millions of people and manage the massive rehabilitation of the devastated infrastructure.

They said that under 10-day campaign, several programmes had been organised in different countries and October 14 had been dedicated to the issues being faced by flood-ravaged Pakistan, adding that a demonstration would be held in Brussels and many cities in Pakistan, including Islamabad on that day. It would be the ‘Abolish foreign debt day’, they said.

Ms Jacquemont and Nasir Mansoor told journalists that the major chunk of the $55 billion loans had been taken by military regimes for the procurement of military hardware etc. Hardly a friction, if at all, was spent on social sector development, they added.

They said the country had to pay over $3 billion every year under the head of debt servicing which could otherwise be spent on provision of better health and educational facilities as well as social uplift of the masses.

According to Ms Jacquemont, IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
is blackmailing Pakistan and forcing it to withdraw subsidies and introduce tax reforms in order to receive the sixth tranche of a loan. Both the conditions are bound to seriously affect Pakistan’s economy and its poor population.

She criticised the Belgian government for pledging just $2.8 million in aid for over 20 million Pakistanis affected by the disaster. She urged her government to immediately write off all the loans it had extended to Pakistan and also push plead Pakistan’s case in the IMF, World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.


She advised Islamabad not to accept loans but only grants and aid. “Keeping in view the floods, it cannot be accepted that repayment of an odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
to rich creditors be prioritised over social needs of Pakistani people,” she argued.

She said that it could not be accepted that international financial institutions — World Bank, IMF, Asian Development Bank etc — took advantage of the natural calamity and Pakistan’s need for reconstruction to make fortunes on loans.

Rehabilitation committee

Chief Minister Syed Qaim Ali Shah has constituted a committee comprising provincial minister Syed Sardar Ahmed, opposition leader Jam Madad Ali and representatives from agriculture, irrigation and other stakeholders to participate and assist in the process of rehabilitation of flood-affected infrastructure and population, APP adds.

Presiding over a high-level meeting at the CM’s House on Tuesday, the chief minister called for chalking out a comprehensive plan, setting priorities and executing the rehabilitation plan on a fast track, saying that people needed immediate assistance.

By the newspaper Dawn



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