Another Bailout or a Debt Trap: Reasons for Going to IMF?

Any government performs better when acting relatively autonomous in execution of daily affairs of national and local governance. Democracy ensures that the campaign promises made by leading political party are translated into active policy making that may carry favorable results for empowering the common citizen. This strengthens democracy and legitimizes governance institutions in the eyes of the voters. However, due to external account challenges, democratic or autocratic governments have been approaching International Financial Institutions (IFIs) for short and long-term assistance. In this perspective, International Monetary Fund (IMF) has been instrumental in disbursement of short-term loans to Pakistan several times over the past 50 years. These loans were provided to bailout the country to finance its high budget deficits and trade imbalances. Nonetheless, these short-term loans are accompanied with conditionalities that stifle the autonomy of the government.

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