The IMF and Pakistan’s Politics: A Complex Relationship

ٰIMF Delegation’s Meeting with the Chief Justice of Pakistan: An Analysis
Introduction:
According to a statement issued by the Supreme Court, a special six-member delegation from the International Monetary Fund (IMF), led by Joel Turquetz, met with the Chief Justice of Pakistan, Yahya Afridi, on Tuesday afternoon, February 11. The delegation raised questions regarding the protection of foreign investments in Pakistan, adherence to contracts, and property rights. In response, the Chief Justice provided an overview of ongoing efforts to enhance judicial reforms and efficiency. He assured the delegation that “Pakistan’s judiciary is independent, and as the head of the institution (the Supreme Court), it is my responsibility to safeguard this independence.”

Details of the Meeting:
In an informal conversation with journalists, the Chief Justice shared that he informed the IMF delegation about the agenda of the National Judicial Policy Making Committee, highlighting that the High Courts oversee the lower judiciary. He clarified to the delegation that “the judiciary does not engage in direct dialogue with such missions (delegations), but this meeting is taking place at the request of the Finance Division.” He further emphasized, “We have sworn an oath to uphold the independence of the judiciary under the Constitution; it is not our role to provide you with all the details.”

The Chief Justice assured the delegation that he would remain cautious regarding his comments and opinions. He also shed light on significant constitutional developments and reforms related to the Judicial Commission of Pakistan, including appointments at the senior judicial level, judicial accountability, and the reorganization of the Judicial Commission.

The Chief Justice mentioned that the Supreme Court is finalizing an important agenda for the upcoming National Judicial Policy Making Committee (NJPMC) meeting, expected in the last week of February. This agenda is being prepared in consultation with various stakeholders, and the Chief Justice invited the delegation to share any suggestions they might have in this regard.

Judicial Accountability and Complaints Mechanism:

During the meeting, discussions also focused on judicial accountability and mechanisms for addressing complaints against judges. The IMF delegation acknowledged the judiciary’s role in maintaining legal and institutional stability and appreciated the ongoing judicial reforms aimed at strengthening governance and accountability. Both parties reiterated their commitment to enhancing judicial performance and upholding the rule of law as a cornerstone of economic and social development.

Constitutional and Sovereignty Implications:
The meeting between the Chief Justice of Pakistan and the IMF delegation has raised numerous questions at both national and international levels. Key concerns revolve around the motivations behind this meeting, its constitutional implications, and its potential impact on Pakistan’s sovereignty.

According to the Constitution of Pakistan, the judiciary is an independent institution that is not accountable to the executive or any international organization. The Chief Justice is not obligated to succumb to any unconstitutional pressure or influence. However, this meeting might be seen as a goodwill gesture or an exchange of information concerning judicial reforms. Such interactions could aim to promote transparency or restore international confidence in legal matters.

Following the 26th Constitutional Amendment, recent reports of divisions and disagreements within the Pakistani judiciary have influenced the country’s political and legal landscape. In this context, the IMF’s engagement with the judiciary could be viewed as a precaution against potential legal disputes or uncertainties that might affect economic stability.

Unusual Nature of the Meeting:
Typically, IMF delegations engage with governments and central banks to discuss financial policies, reforms, and the terms of loan agreements. However, a direct meeting with the judiciary is unusual and may suggest an interest in assessing the resilience of the country’s legal and judicial framework. A robust judicial system is crucial for investment and financial stability, as it underpins a country’s ability to honor debt obligations.

IMF Loan Conditions:
Pakistan has entered into several loan agreements with the IMF, which include conditions such as economic reforms, reduction of subsidies, expansion of the tax net, increases in electricity and gas prices, and measures to reduce the fiscal deficit. These conditions are often unpopular among the public, as they can lead to inflation and unemployment.

Intervention or Agreement Obligation?
Agreements with the IMF usually come with stringent conditions designed to protect the lender’s interests. While these conditions may appear as interference in internal affairs, they are, in fact, part of the terms that the borrowing country has agreed to. Nonetheless, the implementation of these conditions often raises questions about national sovereignty.

Experts hold differing opinions on this matter. The government argues that this is not an intervention by the IMF in Pakistan’s internal affairs. Instead, the delegation is conducting its review mission under the latest loan agreement, meeting with institutions and their heads. According to Pakistan’s Law Minister, Nazir Tarar, this visit falls within the IMF’s “domain.” The rule of law is part of the arrangement with the delegation. The Law and Justice Commission is a subsidiary body of the Supreme Court that prepares recommendations on judicial policy and reforms.

Divergent Views:
Regarding judicial independence and the appointment of judges, these are purely constitutional matters, and the delegation does not interfere in them, nor was this part of their mission. The Law and Justice Commission already maintains contacts with numerous international organizations. However, former Finance Minister Dr. Hafeez Pasha has expressed a contrasting view, stating that such visits and meetings exemplify interference in a country’s internal affairs. He argued that the delegation did not have the mandate to meet the Chief Justice and ask detailed questions. Pakistan has previously entered into loan agreements with the IMF, but never before has the IMF conducted a review at the Supreme Court level.

The IMF delegation’s meeting with the Chief Justice of Pakistan has sparked significant debate, reflecting broader concerns about judicial independence, constitutional boundaries, and national sovereignty. While the government views it as a routine part of the IMF’s review process, critics argue that it sets a troubling precedent. Moving forward, maintaining a balance between fulfilling international obligations and preserving judicial independence will be crucial for Pakistan.

According to economic experts, the meeting of the IMF delegation is in no way an interference in Pakistan’s internal affairs. In their view, Pakistan had already consented to such reviews under the $7 billion programme agreement with the IMF. However, former finance minister Dr. Hafeez Sheikh opines that the Supreme Court has no connection to such matters, and this meeting would have been understandable at the district or high court level, but taking it further was unnecessary.

According to Hafeez Sheikh, the IMF delegation’s mandate is limited to compiling a specific report on corruption, while the IMF team will visit Pakistan in the next two to three weeks to review the $7 billion programme. Based on that review, a decision will be made on whether Islamabad should receive the next tranche of the loan. However, under the agreement with the IMF, Pakistan is bound to implement judicial reforms and progress the programme contingent on the IMF’s review.

This IMF delegation will be on a week-long visit to Pakistan, during which it will monitor six key areas, focusing on how efforts to combat corruption are being implemented. Officials state that the delegation will scrutinise fiscal governance, central bank operations, market regulations, and assess measures related to the rule of law and anti-money laundering in Pakistan. It will also meet with officials from various sectors, including the judiciary, the State Bank, the Election Commission, finance and revenue ministries, and SECP.

Before the agreement for the $7 billion loan between Pakistan and the IMF last year, Pakistan had made efforts to meet the IMF’s conditions. These included increasing tax revenue, raising tax rates in various sectors, and expanding the tax net.

To strengthen the anti-corruption framework, the government plans to amend the Civil Service Act by 2025, ensuring the digital filing and public access of high-level officials’ assets, along with creating a robust framework for asset verification via the FBR.

The judicial and regulatory review is part of the IMF loan programme, and Pakistan has signed this agreement. The country has assured the IMF that it will enhance the capacity of its institutions to fight corruption and provide non-discriminatory business and investment opportunities for all.

The concept of economic slavery arises when a nation, burdened by debt, loses its ability to independently formulate policies. There are many historical examples where economic dominance has limited the sovereignty of nations. For example, in the 19th century, Egypt lost its sovereignty after failing to repay British loans, leading to British occupation. Similarly, in modern times, the term “debt-trap diplomacy” is often used in reference to China’s Belt and Road initiative.

In recent years, Pakistan’s current government has implemented tough economic reforms and signed multiple agreements with the IMF in an attempt to prevent the country from going bankrupt. Measures such as tax reforms, reducing expenditures, and increasing foreign exchange reserves have been taken. However, these efforts have proven effective only temporarily, and the country’s economy remains unstable with rising debt.

If Pakistan were to default, international financial institutions, particularly the IMF, could take various steps to recover the loans. These may include seizing the country’s foreign assets, imposing sanctions on international financial aid or trade, and taking legal action in international courts. In some cases, internal assets such as state-owned enterprises or natural resources may be put up as collateral or come under international control. In the past, Pakistan has pledged valuable assets under various financial agreements, including the Gwadar Port, motorways, and specific shares of the national airline. Additionally, some natural resources and power plants have also been pledged, or foreign investors’ influence over them has grown. These measures were taken for short-term financial aid but may have long-term consequences on the country’s sovereignty.

The meeting of the IMF delegation with the Chief Justice is significant in many ways, but claiming it is direct interference or an attack on Pakistan’s sovereignty might be premature. Pakistan needs to stabilise its economic policies and reduce its reliance on loans to safeguard itself from the influence of international financial institutions. History teaches us that real sovereignty is only possible through economic independence, and political stability is also crucial for this. Political anarchy, corruption, and institutional weaknesses are major obstacles to national development. The causes of political anarchy in Pakistan include power struggles, weak democratic institutions, and the lack of transparency in the electoral system.

The role of political parties is key, and they must strengthen their internal structures, uphold democratic principles, and prioritise the public’s welfare.

The growing tensions between current superpowers, such as the United States, China, and Russia, are causing global instability. The ongoing conflict between Gaza and Israel and America’s aggressive foreign policies have not only endangered peace in the Middle East but have posed a threat to global security. This international tension also affects countries like Pakistan, which face economic and political pressure.

The meeting between the IMF delegation and the Chief Justice is significant in several ways, but it would likely be premature to categorise it as direct interference or an assault on Pakistan’s sovereignty. What is more important is that Pakistan needs to stabilise its economic policies and reduce its dependence on external loans. This is necessary to avoid being overly influenced by global financial institutions. Along with this, it is crucial for Pakistan to pursue political stability and adopt a thoughtful, strategic approach to the changing dynamics of international politics.

History has shown us that true sovereignty is not merely achieved through economic self-sufficiency but is also deeply rooted in political stability and the crafting of balanced, diplomatic policies on the global stage. Pakistan must recognise that it is not just an emerging power in the region but also the first Islamic nation to possess nuclear capabilities. This reality has made Pakistan a subject of concern for global powers, particularly the United States, which has repeatedly expressed its reservations. In fact, the US has imposed sanctions on Pakistan twice over the years, primarily due to the country’s missile technology and nuclear advancements.

What’s particularly noteworthy is that the financial institutions lending to Pakistan are controlled by the same powers that view the nation’s nuclear capabilities with suspicion. These powers, who have significant control over the global financial system, often influence the terms and conditions of loans, which can put Pakistan in a difficult position. While international financial assistance remains crucial, it is important for Pakistan to carefully navigate the complexities of global politics and maintain a delicate balance between its economic needs and its national sovereignty.

By strengthening domestic policies, reducing dependence on foreign loans, and positioning itself strategically on the international stage, Pakistan can safeguard its sovereignty and protect its interests in a rapidly changing global order.