HERE’S an interesting little story I stumbled across while researching in the archives of the IMF last year. I was going through the declassified background documents connected with Pakistan’s borrowing from the Fund through the 1980s, and discovered that on two occasions, a nasty leak to the media nearly derailed the talks.
The first leak came in 1981. Pakistan was in talks to enter a programme at that time and just as the talks had concluded and an agreement reached, but signatures not yet put down, a report ran in the Financial Times that began by saying that the easy part of negotiating a programme has just been concluded, but now came the hard part of implementing.
The report painted a ghastly picture of poverty in Pakistan, and went on to describe the terms of the agreement that was ready for signature in astonishing detail. Clearly, whoever leaked the information to the Financial Times reporter had access to the innermost details of the agreement, and was bent upon ensuring that the whole thing fell apart.
The leak was damaging enough to spark an internal investigation within the IMF. Then finance minister Ghulam Ishaq Khan angrily sent a clipping of the report (it was an era before the internet, so links were not emailed around), asking the Fund to investigate if the leak happened at their end. The Fund concluded the leak was at the government’s end.
The nature of the leak had some clues as to who might have been responsible. It was directed at the Pakistani government, particularly the stewardship of Ishaq Khan in the finance ministry, and was clearly the work of someone who had it in for the finance minister and wanted to derail the programme just to spite him, to deny him the chance of claiming the successful conclusion to the negotiations.
It didn’t work. The programme got under way successfully, although how it ended is another story, and no further attempts to derail it appear to have been made. At least none that were quite so public.
Whoever leaked the information to the ‘Financial Times’ had access to the innermost details of the agreement with IMF.
Then again in 1986, another episode of exactly the same sort happened. The government of Muhammad Khan Junejo was in talks with the IMF in the midst of rapidly depleting reserves, and at one point, when the talks appeared to make progress, a nasty and very damaging leak emerged, again in the Financial Times, and again carrying astonishing details of the programme.
Once again the government of Pakistan protested vigorously to the IMF that someone at their end was responsible for the leak. Once again the Fund investigated and found that nobody at their end was responsible.
The interesting thing about the second leak was that the level of detail was so well-sourced that even the Fund high-ups had to ask their staff whether what was stated in the article was in fact true. Specifically, the article had leaked that the new programme being negotiated calls for a 10pc devaluation of the rupee up front as a condition.
Those days the value of the rupee was a major rallying point for the government, even more so than it is today. Even small devaluations were seen as signs of failure, so something like 10pc devaluation up front was in fact a huge step. By comparison, today that would mean a Rs10 fall in the value of the rupee, something that could spark large-scale capital flight if rumours spread that it was imminent.
Precisely because this was such a sensitive issue, it was never spelled out in the letter of intent around which talks were taking place. There was a section that spoke about the currency in highly technical terms, and you would need to read the language carefully and run some calculations to actually figure out that they were talking about a large devaluation of the rupee.
So shrouded was the whole affair of the devaluation, that management actually had to ask staff involved in the negotiations whether it was true that a 10pc devaluation of the rupee was programmed in the document as a precondition. The staff responded in the affirmative.
So clearly whoever leaked the information had an extraordinary level of access and understanding to pinpoint the issue. And whoever it was, had access to the highest levels of international journalism.
The interesting thing is that the second leak was not directed at Ishaq Khan, since he was not the finance minister at that point. So whoever leaked that information, clearly wanted to derail the talks, but went no further than leaking damaging information about them. I’m willing to believe that it was the same person in both cases, since the fingerprints on the leak were identical.
They both pinpointed highly damaging information from the negotiations, and planted it in the hands of a reporter from the Financial Times, and in both cases the information was construed in such a way as to cause maximum embarrassment for the government for having been forced to agree to humiliating terms.
It was never discovered who the person was, although to me it is a little obvious. I’ll refrain from naming anyone since it would be speculative, but whoever did the deed had to be a good economist, with access within government, contacts in the global media, and driven by a highly political and competitive streak. Draw your own conclusions.
The choice news outlet is not as important. Those were the days of controlled media, and the person leaking information could not be sure that a local journalist would indeed be able to run with the story. Even if the local journalist were able to do so, there was no guarantee that he or she could be counted upon to protect the source. And besides, the Financial Times gave the story an international profile that local media could never do, and therefore created far more embarrassment for the government, and the finance minister particularly than the same story in the local media could ever have done.
To me it’s clear, that this was the intention all along: to embarrass the government and put
the finance minister in a difficult position, perhaps so difficult that he would be removed from the
post, creating an opening. Like I said, draw your own conclusions.