Global Watch | No bailout package can help Pakistan as it suffers from systemic failure

Three incidents happened recently in Pakistan which shows the extent of failure of Pakistan as a nation-state and the prevailing chaos there. First, Pakistan’s power grid collapsed on 26 January 2023 for a whole day, plunging 220 million Pakistanis literally into darkness for at least 24 hours. Second, four days after this power crisis, there was a deadly attack in a mosque in the high-security zone at Peshawar; at least 100 people were killed and a large number of people were injured. Third, the much awaited visit of the International Monetary Fund (IMF) team to review Pakistan’s economic policies before offering a bailout package of $1.1 billion took place in early February. The visit concluded with the international body asking for drastic structural reforms. Pakistan’s capacity to carry out these reforms is highly doubtful as it has been taking such bailout packages from the IMF since 1958 and has hardly done anything to reform itself. Currently, Pakistan is on the brink of an absolute economic collapse with its foreign exchange reserves plunging to such a low that it can buy less than three weeks of imports and that includes crucial items like fuel and food. In November 2022, the IMF had offered a $1.8 billion bailout package to a fledgling Pakistani economy. But the condition was that the Pakistani government would have to withdraw subsidies. Pakistan refused this package. The Shehbaz Sharif government wasn’t ready to go for structural reforms and withdraw subsidies as general elections are due in 2023. With corruption being the bedrock of the Pakistani system and governance being last on the ruling elite’s agenda, the economic crisis spiralled by January 2023. The Pakistani rupee devalued so much that it has become one of the poorest currencies in the world. People in Pakistan have started hoarding US dollars as they fear that the Pakistani currency might not be of any use in near future. y January 2023, Pakistani currency was trading at more than Rs 260 against one US dollar. At present it is trading around Rs 280 against one US dollar. The fuel prices have spiralled with petrol and diesel costing between Rs 250 and Rs 270 per litre, resulting in skyrocketing of inflation and making even basic goods unaffordable for most people. By the last week of January, 12,000 shipping containers filled with cargo piled up in Pakistani ports because banks were refusing to issue letters of credit to clear their goods. More than 10 million traders have been affected severely because of this situation. Because of high fuel prices and lack of imports, industrial units across Pakistan have started shutting down. The result is that what started as a ‘Balance of Payment’ crisis for Pakistan with low forex reserves has now become a major ‘Supply Chain Crisis’. What has added to the woes of Pakistan is its past record which shows that any amount of help given to Pakistan by international bodies or its allies hasn’t helped it to move forward. It is clear that Pakistan itself has to be blamed for this mess. It has perpetrated upon itself a systemic failure and any amount of help from the IMF or the rest of the world can’t help Pakistan unless this rot is stemmed. In the past 75 years since its formation, Pakistan has taken IMF’s help to salvage itself from an economic crisis 22 times. Out of 75 years since its Independence, it has spent 34 years surviving purely on IMF doles. The first time Pakistan went to the IMF for seeking a package to get bailed out of an economic crisis was in 1958. Pakistan is currently facing its 13th balance of payment crisis since 1988 and seeking help under 23rd IMF programme since 1958. One of the key indicators of systemic failure ailing Pakistan is that the situation doesn’t change whichever party may come into power in Pakistan. During the last three decades four IMF packages were taken under the regime of Pakistan Muslim League-Nawaz (PML-N), six packages were taken under Pakistan People’s Party, two packages were taken during military rule of General Pervez Musharraf, and one package was taken under the rule of Pakistan Tehreek-e-Insaf party led by Imran Khan. Pakistan’s external debt stood at $126.9 billion dollars in September 2022. Its debt to GDP (Gross Domestic Product) ratio stands at an extremely unhealthy 70 percent. Almost half of the revenue received by the Pakistani government is marked for paying interest on the debt. Pakistan’s bilateral debt is $27 billion out of which the Chinese debt stands at $24 billion. Pakistan has landed itself in a mess vis-à-vis China also. There is growing discomfort in the Chinese establishment as far as its relationship with Pakistan is concerned. The failure of the Pakistani establishment to rein in the terrorist groups due to the support extended by its deep state has resulted in attacks on Chinese working in Pakistan. The chaos and rebellion in Balochistan has become a major stumbling block for China to exploit Pakistan’s rich mineral resources and transport them through Gwadar port. It doesn’t seem likely in the near future that China could plunder these minerals and resources as people of Balochistan have been up in arms to protect their land and resources. Meanwhile, there has been complete failure of security apparatus across the country with radical Islamic groups becoming de facto rulers in several pockets. There has been a major policy failure in this regard as it is the Pakistani army which was first on the block to negotiate with radical Islamic terror groups for ceasefire especially after Taliban took over Afghanistan in August 2021. This was a death blow to whatever little legitimacy the Pakistani government had. And the result is visible on the ground with violence spreading across Pakistan. Maleeha Lodhi, former Pakistani ambassador to the US, UK and the UN, put it aptly in one of her recent columns in Pakistani newspaper Dawn, “In a book I put together two decades ago, the late Meekal Ahmed, one of Pakistan’s most distinguished economists, contributed a chapter titled ‘An economic crisis state’. He had this to say then: ‘Economic management in Pakistan has steadily deteriorated to the point where the economy has lurched from one financial crisis to the next. At the heart of the problem has been poor management of public finances and deep-seated unresolved structural issues in the economy that bad management and poor governance has exacerbated. The consequences are plain to see: macroeconomic instability, high inflation, poor public services, criminal neglect of the social sectors, widespread corruption, crippling power outages, growing unemployment, deepening poverty and a deteriorating debt profile.’” Meekal also wrote, “An IMF programme gets some reforms implemented as part of its conditionality but as soon as the programme is over or ended by the authorities’ themselves mid-way, all the reforms are rolled back.” Twenty-three years later nothing has changed. The writer, an author and columnist, has written several books including ‘Taliban: War and Religion in Afghanistan’. He tweets @ArunAnandLive. Views expressed are personal. Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.