بسم الله الرحمن الرحيم
Introduction: IMF, Pakistan and the Khilafah
Pakistan today is gripped in intense debate over the hold of the International Monetary Fund (IMF) over the economy. However, the debate is limited to the extent of compliance to the IMF, rather than challenging the IMF itself and the principles upon which it stands. In origin, the IMF prescriptions are destructive to Pakistan’s economy, as they are based on capitalism, a flawed ideology.
The economic prescriptions offered by the capitalist economic system for struggling economies of developing countries, like Pakistan, are mainly based on the policy recommendations of what has come to be known as the “Washington Consensus.” This consensus was established by the International Monetary Fund (IMF), World Bank and the US Department of the Treasury. It is a set of ten economic policy prescriptions, offered as a reform package for ailing economies. Apparently the consensus recommends structural reforms that increase the role of market forces in exchange for immediate financial help to strengthen economies. However, a detailed look reveals troublesome policy recommendations that worsen a dire economic situation.
The prescriptions include the withdrawal of subsidies, increasing tax burdens, free-floating currency exchange rates to drive devaluation, market driven interest rates, free trade policies, privatization of state enterprises and encouraging foreign direct investment by relaxing conditions of investment and enforcing favorable rules for private ownership rights. These prescriptions carry the promise of economic recovery in the long term, but in reality only ensure immense benefits for the large capitalists, foreign and local.
Once an IMF program fails to deliver, which it inevitably will, a new one is offered to rescue the crisis-stricken economy, along with new set of assurances. The vicious cycle repeats. The immediate gains are only for the large capitalists, with ensuing concentration of wealth in the hands of the few, increasing gap between the rich and the poor.
Adopting capitalist solutions to solve the problems caused by capitalism itself, is seeking a cure from the disease itself. The implementation of capitalist solutions through colonialist institutions, such as the IMF, have repeatedly failed in the specific case of Pakistan, as well as around the world. It is time to understand why capitalism has failed in Pakistan and look towards the Islamic economic system for economic revival. It is the Khilafah alone that will prevent the continual concentration of wealth that occurs under capitalism, ensuring the circulation of the wealth throughout the society. Allah (swt) revealed,
كَيْ لاَ يَكُونَ دُولَةً بَيْنَ الأَغْنِيَاءِ مِنْكُمْ
“Lest the wealth circulates solely among the wealthy from amongst you.” [Surah Al-Hashr 59: 7]
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