Development 2.0--by Nadeem Ul Haque

In 2008 financial overzealousness led the global economy over a precipice but it did not kill the romance of finance. In particular donors love finance and love to offer financial inclusion as a panacea for all societal ills. DFID and the IFC have made the State Bank of Pakistan (SBP) run programs for financial inclusion in exchange for loans for more than a decade. SBP mission expanded into development and it opened up departments on housing, small and medium business and microfinance. Meanwhile, the IMF was pushing for independence for SBP with a sharp focus on monetary policy.   The country’s development body, The Planning commission has been rendered a mere project office because donors have full freedom to do policy everywhere. SBP engaged in mission creep could not even design its own financial inclusionprogram; it needed Oxford Policy Management, a UK based consulting firm, to do the design . Many million dollars later, SBP is pushing financial programs...

Reagan deregulation created a romance with finance. My generation of educated Pakistanis benefited from it greatly—even gave us a Prime Minister. The romance with finance still plays strongly in Pakistani political/administrative and intellectual class. We look to finance our way out of things. It is the easy way out and we love shortcuts. Every government runs after money. Bureaucrats are trained to look for aid and financing above all other issues. We sing siren songs to foreign investors luring them into our quagmire unaware that they like Ulysses might come prepared. We love clever financing schemes: diaspora bonds as if immigrants can be conned into ‘cheaper than the market’ lending. Policy circles continuously chatter about securitizing remittances, floating convertible bonds or issuing more Sakooks expecting financial magic to deliver effortless development.     Why do we think that we can con the world with financial instruments? Do we now know that finan...