IMF bailout must ensure ‘rights-based recovery’

According to Human Rights Watch, the terms of the IMF's loan may either make Pakistan's social and economic hardships worse or give it much-needed relief.

KARACHI: On Tuesday, Basic Freedoms Watch urged the International Monetary Fund (IMF) to collaborate with the Pakistani government to protect the financially disadvantaged by enlarging social insurance frameworks and lowering change estimates that disproportionately harm the most vulnerable citizens.

"With neediness, expansion, and unemployment on the rise, Pakistan is facing perhaps the worst financial crisis in its history, endangering the rights of a large number of people to health, food, and a sufficient way of life," it stated in a proclamation.

On February 1, 2023, the Pakistani government began regular communications with the IMF to look on a plan to preserve the economy, remembering a portion of $1.1 billion for credits from a $6.5 billion bailout that had been designed to prevent a financial collapse in 2019.

Many Pakistanis have been forced into poverty and denied basic social and economic freedoms, according to Patricia Gossman, partner and Asia-Pacific director of Common Liberties Watch. "The IMF and the Pakistani government have a responsibility to solve this emergency in a way that prioritises and protects low-paid citizens," the statement reads.

In the week ending January 27, the foreign exchange reserves of Pakistan's central bank fell by 16% to $3 billion, or less than three weeks' worth of imports. Strong shortages of foreign currency suggest that many imports, especially essential medicines, are insufficient or unfeasible.

Pakistan is currently seeing its highest levels of population growth since 1975, with the cost of temporary food items soaring by more than 60% in January. The goal is for expansion to continue increasing. In response to IMF recommendations, the public authority increased fuel prices and removed a cap on the new swapping scale on January 29. This caused the rupee to devalue unusually, recalling a 9.6 percent disaster for one day in January.

The goal of Pakistan's discussions with the IMF, which will continue through February 9, is to obtain the IMF's 10th survey, which is targeted at helping countries with balance-of-installments difficulties, free from the IMF's Lengthy Asset Office. The IMF bailout element would make it easier to deal with the severe lack of uncharted trade and grant access to other sources of funding, including those from multilateral and two-sided donors.

Pakistan participates in the Worldwide Agreement on Monetary, Social, and Social Privileges, which protects, among other things, the freedoms to food, shelter, and a decent standard of living. "The conditions the IMF places on this credit could either make Pakistanis' social and financial problems worse or provide them with the desperately needed relief while addressing the root causes of the catastrophe. A few measures that the IMF has suggested as requirements for Pakistan to receive IMF financing and handle the immediate financial crises would have both an immediate and indirect adverse impact on low-paid workers "Basic rights Watch raised the issue.

The IMF has asked Pakistan to increase the overall transactions charge rate to at least 18% from the current 17% in order to levy additional taxes, according to reports. It has also asked Pakistan to eliminate energy and fuel endowments and switch to a market-based switching system.

However, a declining local currency, rapid population growth, and the withdrawal of fuel and energy reserves have previously made it more difficult for some people to meet their basic needs.

Expanding value-added fees rather than imposing reasonable costs will be toughest on people who are already being negatively impacted, it said.

According to Common liberties Watch, the IMF programme should oversee a rigorous assessment of the immediate and indirect effects these changes would have on low-wage workers and take appropriate steps to relieve them.

A portion of the anticipated reserve money should be used to strengthen social safety nets by adding a primary benchmark to increase inclusion and social spending in general. The IMF should push Pakistan's government to develop plans to increase women's access to employment by removing barriers, such as by providing state-financed maternity leave and allowing access to appropriate feminine hygiene.

The type of new evaluation methods should be mild, and they shouldn't exacerbate imbalance or raise prices for most necessities in ways that undermine freedoms. Any reductions in funding for energy, fuel, and gaseous fuel should be preceded by a thorough change plan that ensures everyone has access to the energy sources necessary for vital privileges.

The IMF's recommendations should encourage governments to spend money on initiatives that benefit their citizens, such as health care, education, and programmes to reduce poverty. Government revenues should also be encouraged by strengthening the foundation for collecting taxes and implementing strict and straightforward responsibility measures. The Basic liberties Watch urged the IMF to use its tools to promptly make the necessary reserves available while putting in place safeguards to protect people's financial and social rights.

The growing financial crisis in Pakistan coincides with the devastation caused by catastrophic floods. Floods in August 2022 affected more than 30 million Pakistanis, killed more than 1,700 people, destroyed numerous homes, and destroyed vast tracts of agricultural land, costing billions of dollars in damage.

Less than half of Pakistan's 230 million people experienced food insecurity in 2020, yet only 8.9 million families received assistance to lessen the effects of unchecked growth. In provincial areas, which were particularly heavily struck by the floods, neediness is moved. 

Gossman advised Pakistan's government to use the influx of resources to provide assistance to those who were worst affected by the economic crisis.

"The IMF should provide Pakistan the flexibility and time it needs to achieve a realistic, all-encompassing, and privileges-based recovery."