For the seven months that Imran Khan’s party has been in power, the government’s economic policy has been clearly manifested in two directions. One, to blame the previous government of the Pakistan Muslim League-Nawaz (PML-N), of the now-incarcerated former Prime Minister Nawaz Sharif, for everything that has gone wrong with the economy, and two, to go around the region with a begging bowl looking for so-called ‘friendly’ countries to bail Pakistan’s economy out.
Instead of this two-pronged economic management policy, had the government spent some time trying to tackle and fix the problems, things would not have been half as bad as they have turned out to be. It is fashionable, and almost a requirement, for every new government to hold the previous government responsible for all ills that affect the country—especially in the economic arena. The Pakistan Tehreek-e-Insaf (PTI) government leaves no opportunity to say everything that is wrong in Pakistan is because of the previous government.
Even if one concedes to the claim that the now not-so-new government did inherit some problems in the economy, many analysts and commentators have suggested to the PTI government to grow up after seven months and start taking measures which can bring about real change.
There has been much criticism of the government for not taking any substantive measures to fix the economy—some have argued that by not doing so, it has itself wrecked the economy making it far worse than what was inherited. The economy has only deteriorated from where the Imran Khan government took over, questioning the claim that all that is wrong is due to the past. For example, inflation was 8.2 per cent last month, the highest in the last five years; both the current account deficit and the budget deficit were far worse compared to seven months ago, and other numbers are also showing noticeable downward trends.
When the (PML-N) left office after five years, the GDP growth was 5.8 per cent, the highest in 12 years. The expected growth rate for this financial year, which would cover 11 months of the incumbent government, is expected to be around only 4 per cent.
The major policy initiative launched by the government to address its falling foreign exchange reserves has been Imran making trips to few countries which consider Pakistan a friend of sorts. He has twice visited Saudi Arabia and the UAE, and once each China, Malaysia and Turkey—all in the hope that these governments will provide ‘relief’, or aid, to Pakistan’s economy since a balance of payments shortfall has resulted in a fall in reserves. So far, these begging trips have realised in around $3 billion in cash from Saudi Arabia and $1 billion from the UAE (with around $4.1 billion more expected ‘very shortly’, according to the finance minister) and around $3 billion of an oil facility with deferred payments from Riyadh, where Islamabad will have some leeway in paying for imported oil.
The Chinese government may have provided some financial assistance in the form of a loan deposited in the central bank, but not much is made of it. Moreover, even these friendly loans don’t come cheap with an interest rate of around three per cent. As a consequence of these cumulative borrowings, Pakistan’s external debt crossed $100 billion in January and is expected to be 38 per cent of the GDP by June. All this money will eventually have to be repaid.
Yet, despite the $4-$6 billion deposited into the State Bank of Pakistan, foreign currency reserves have continued to fall. In January, they were less than seven weeks’ worth of imports, which was a five-year low. They have risen a little since then, but still worth less than three months of imports. All the money supposed to support the economy and the Pakistani Rupee—which has devalued by 34 per cent over the last year—seems already to have evaporated. And, there is the principal and interest to be paid in a year or two when these friends come calling for their money back.
It was Pakistan’s desperate financial state which led the PTI government to show its utter subservience, sycophancy and servitude to the crown prince of Saudi Arabai Mohammad Bin Salman during his two-day visit last month. Islamabad was in a lockdown situation which was more curfew-like than celebratory. He left without putting any hard cash in the Pakistan kitty making promises and signing memoranda of understanding (MoU) for some projects worth $20 billion which will take several years to complete if they ever come on line. According to estimates, of the thousands of MOUs signed by Pakistan in recent decades, only a handful have materialised.
In these seven months, two key areas or institutions have been absent from the attempts to improve Pakistan’s economy. After much fanfare since 2015, investment in the $62-billion China-Pakistan Economic Corridor (CPEC)—Pakistan’s prized investment project—has all but become silent. Since Imran took over, the CPEC somehow, for reasons which are not fully known, has dropped off the news circuit and the front pages of Pakistan’s newspapers. Only some CPEC projects have been completed—that too partially. Otherwise, there seems to be a halt on much activity. Whether this is temporary or whether the Chinese have had a rethink is yet unknown.
The other conspicuous absence has been the International Monetary Fund (IMF). It was largely expected that whichever party won the last July elections, it would undertake an IMF stabilisation programme worth around $12 billion. This did not happen. Now, both the World Bank and the Asian Development Bank have held back some of their loans to Pakistan. Perhaps, one reason why Imran chose not to go to the IMF was that he had stated prior to becoming prime minister that he would rather commit suicide than take loans from the Fund or the World Bank. However, with an IMF agreement expected over the next few months, it is improbable that he will carry out his threat.
Many of the promised social welfare projects that aim to turn Pakistan into Imran’s model Medina state will be cancelled and the IMF programme will have dire consequences on the working people of Pakistan. The responsibility for these consequences will rest squarely on the shoulders of the incumbent government.
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