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The Blame Game: IFIs and their Exploitation of Countries

Story Highlights
  • Hungary and Greece: Examples of IMF-led Disastrous Reform Recipes
  • Pakistan: A Victim of the Debt Trap
  • Opponents of the China-Pakistan Relationship and CPEC
  • The Economic Crisis in Pakistan
  • The Contributions of CPEC

International financial institutions (IFIs) have long been accused of exploiting countries under their supervision and blaming others for their failures. The economic reform period under the IMF program has resulted in the collapse of many countries, with Latin American economies being the most cited examples. Recent examples include Hungary and Greece, where the IMF-led reform recipes have proven disastrous.

Hungary and Greece: Examples of IMF-led Disastrous Reform Recipes

Hungary implemented austerity measures, reduced pension benefits, froze wages, and reduced the deficit under an IMF deal. These measures hit social welfare spending and systems, leading to agitation by the public. When the government tried to create space for the poor and introduced a banking transaction tax, the IMF reacted strongly and halted cooperation. Despite following the IMF and European institutions’ recipes, Greece still needs to find a sustainable solution.

Pakistan: A Victim of the Debt Trap

Pakistan is one of the many developing countries entangled in a debt trap, paying the price in the form of high inflation, a free fall of the rupee, shrinking production, and elimination of social welfare spending under the dictation of IFIs. Instead of accepting their mistakes, the IFIs are trying to shift blame onto China, using it as a scapegoat for their mistakes.

Opponents of the China-Pakistan Relationship and CPEC

The US and India are fierce opponents of the China-Pakistan relationship and the China-Pakistan Economic Corridor (CPEC). The US has been pushing Pakistan for a long time to quit CPEC and the BRI as part of its policy to contain China and check its peaceful rise. India is also trying to step in to sabotage CPEC by spreading false rumors about Chinese personnel and its embassy in Pakistan.

The Economic Crisis in Pakistan

An analysis of recent decades reveals that the current economic crisis has stemmed from two main factors – IFIs and the war on terror. The war on terror has undermined Pakistan’s standing in the global arena and its security situation. Although Pakistan did not want to become part of the war, the US and the West forced it to become a frontline ally.

The Contributions of CPEC

Contrary to debt trap conspiracies, data shows that the contribution of CPEC programs to the national debt is only 4.5% of the total external debt. An overwhelming majority of CPEC projects are investment projects, and the debt under CPEC is productive, generating economic activities and livelihood opportunities. Moreover, China had provided debt to Pakistan in dire situations when the allies and IFIs had abandoned it.

IFIs, the US, and the West may keep their mindset and practices the same, and they believe they have the right to say whatever they want. To counter these campaigns and allegations, Pakistan and China must adopt a proactive rather than a reactive policy, which will not help. The two friendly neighbors must establish mechanisms to counter these allegations and campaigns, leading to a strengthened China-Pakistan relationship and a prosperous Pakistan.

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