After weeks of speculation, Saudi Arabia on Tuesday (Oct 23) stepped forward with a $6 billion bailout package for Pakistan’s ailing economy. The package includes $3 billion balance of payments support and another $3bn in deferred payments on oil imports.
The Saudi package may provide breathing space to the government for dealing with economic challenges, but would not be enough to avoid the IMF facility. It is believed that improved foreign exchange reserves would strengthen Pakistan’s negotiating position in talks with the Fund.
The Saudi financial help agreement came during a visit by Pakistan Prime Minister Imran Khan to Riyadh where he met King Salman Bin Abdul Aziz.
Khan also attended a Saudi Arabian investment conference where the new Pakistani leader launched a charm offensive targeting potential investors as Pakistan continues to seek funding to plug its deteriorating finances.
Saudi Arabia expressed its interest in investing in Pakistan’s petroleum refinery and a Memorandum of Understanding (MoU) will be signed after obtaining cabinet’s approval. The earlier visit of the Saudi delegation had evaluated the possibility of investing in the project.
The kingdom has also expressed interest in development of mineral resources in Pakistan, the statement added. For this purpose, the federal government and the Balochistan government will hold consultations, after which a delegation from Saudi Arabia will be invited to visit Pakistan.
Finance Minister Umar has said the government don’t want to fully rely on the IMF. He said the loan program with the IMF is almost final, but the government will have to see that the IMF does not place any “undoable conditions” for Pakistan in return.
An IMF team is set to arrive in Pakistan in early November to begin negotiations.
Pakistani media on Monday reported that the country immediately needed $12 billion to $13 billion to ease the financial crisis and retire foreign debt. Pakistan formally approached the IMF on October 12 for a bailout to tide over the economic crisis. But some tough talking by IMF Managing Director Christine Lagarde and the US on Pakistan’s bailout plan, demanding absolute transparency on the country’s debts, including those owned by China under the China-Pakistan Economic Corridor (CPEC) projects, has upset Islamabad.
It is not a rocket science to know why Pakistan is reluctant to go to the IMF which is a sophisticated tool to control the economy of the IMF clients and to transfer resources from the poor countries to rich countries.
American Interests and IMF Lending
To borrow Thomas Oatley and Jason Yackee, the authors of ‘American Interests and IMF Lending,’ the financial resources it controls allows the IMF to exert greater influence than practically any other international organization in history.
Of particular importance here is the American ability to exert influence in the decision-making process surrounding the creation of IMF conditionality agreements which are the IMF’s primary policy instrument.
“Abundant case studies suggest that the US does exert influence over conditionality agreements. During the 1980s, for example, the US pressured the Fund to extend credits to Argentina (Killick, 1998, 74). In 1982, the Reagan administration pressured the IMF to extend a 3.9 billion credit to Mexico (Cohen, 1985, 722). In 1995, the Clinton Administration pressured the Fund to offer assistance to Mexico. Moreover, American politicians act as though the US exerts influence over conditionality agreements. The US Congress has passed at least 60 legislative mandates requiring the American representative at the Fund to use conditionality agreements to achieve specific American objectives,” Oatley and Yackee said and added:
“While episodic evidence thus suggests that the US does exert influence over conditionality agreements, only one large study has looked for a systematic relationship between American power and interests on the one hand and IMF conditionality agreements on the other (Thacker, 1999). Examining a large sample of developing countries across time, Thacker uses American foreign policy interests to predict which governments will receive a conditionality agreement. He finds that governments that are willing to become more supportive of American foreign policy goals are more likely to receive conditionality agreements than other governments. According to Thacker, therefore, the US uses its influence in the IMF to cultivate foreign support for American foreign policy goals.”
American power extends into the operational decision-making surrounding the Fund’s most important policy instrument. American policymakers use this influence to pursue financial and foreign policy objectives, Oatley and Yackee concluded
West dominates global financial system
It will not be too much to say that the West dominates global decision-making through minority control of the central banking system (Bank of International Settlements), IMF, World Bank, Security Council and other institutions of global governance.
The G8 represent less than 15% of world population, yet have over 60% of its income. The West has veto power in the World Bank, IMF and WTO and regulates global monetary policy through the Bank of International Settlements (BIS). Although the rest of the world now has a majority in many international institutions, it does not have the political power to reject decisions by the Western minority.
In The Clash of Civilizations and the Remaking of World Order, Samuel P. Huntington describes how “the United States together with Britain and France make the crucial decisions on political and security issues; the United States together with Germany and Japan make the crucial decisions on economic issues.”
Huntington quoted Jeffrey R Bennett to claim that Western nations: (1) own and operate the international banking system; (2) control all hard currencies; (3) are the world’s principle customer; (4) provide the majority of the world’s finished goods; (5) dominate international capital markets; (6) exert considerable moral leadership within many societies; (7) are capable of massive military intervention; (8) control the sea lanes.
In short, Huntington presents a ‘framework, a paradigm, for viewing global politics’ to protect “Western civilization”.
Confessions of an Economic Hit Man
Interestingly, John Perkins wrote a book titled: Confessions of An Economic Hit Man in 2004 where he exposed the exploitation of the poor countries through western established economic institutions.
John Perkins was an economic hit man. He defines economic hit men as, “highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign ‘aid’ organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources.
Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.
Perkins was hired as an economist for the international consulting firm of Chas. T. Main, Inc. (MAIN).
He told in confidential meetings with “special consultants” to the company that he had two primary objectives:
(1) He was supposed to justify huge loans for countries. These loans would be for major engineering and construction projects, which were to be carried out by MAIN and other U.S. companies such as Bechtel, Halliburton, Stone & Webster and Brown & Root.
(2) He was supposed to help bankrupt the countries that received these loans after the U.S. companies involved had been paid. This would make sure that these countries would remain in debt to their creditors and would then be easy targets when the U.S. needed favors such as military bases, UN votes and access to natural resources like oil.
The original version of this astonishing tell-all book spent 73 weeks on the New York Times bestseller list, has sold more than 1.25 million copies, and has been translated into 32 languages.