It really couldn’t get worse for Shehbaz Sharif. As the consensus Prime Minister of a divided coalition and a divided country, he has the unhappy job of bringing the economy to order in Pakistan at a time when the world itself is in crisis and there’s hardly anyone willing to help. The International Monetary Fund (IMF) has once again stepped in the breach, making this the 23rd time it has done so since Pakistan became a member in 1950. India has done so seven times. Don’t cheer too hard though. Pakistan’s plight, like that of Sri Lanka, is a bad indicator for everyone. It also might be a lesson in what not to do.
Pakistan on Sale
Concern is mounting within Pakistan over whether it is hurtling the Sri Lanka way towards a total breakdown. That alarm is understandable. The Cabinet recently passed an ordinance that will allow it to sell state assets to rescue the economy. Its details are telling. While limiting this to government-to-government transactions, the Cabinet carefully notes that “an investigating agency, anti-graft agency, law enforcement agency or a court shall not inquire into or initiate investigation for any procedural lapse or irregularity by any person in a commercial transaction or agreement under this ordinance…(and) No person shall be sued in his personal capacity for action taken in his official capacity”.
Clearly, no one wants to take risks in the conflict-prone politics of Pakistan, where almost all leaders have spent time in jail on trumped-up or real charges. In the storm of criticism that followed, few commented on the fact that the Prime Minister has little choice in the matter. The currency is in free fall, reaching its present unprecedented 232.85 to the dollar, while total debt and liabilities jumped to Rs 53.5 trillion. The total domestic debt-to-GDP ratio was 55.1% in June 2021, while it was 56% in June 2020 and 54.4% in June 2019, the report said. For a relative picture, India had a debt-to-GDP ratio of 19.9%. That’s causing fears here. Pakistan’s debt is hair-raising for everyone, including investors. It has already been shut out of the bond markets. Now, it’s just the International Monetary Fund, no one else.
Payback Time?
In February, the IMF allowed authorities to draw about $1 billion, which brings the total allocations for budget support to about $3 billion. That’s hardly enough given the fact that Pakistan owes China far more than what it owes the IMF, which was calculated at about $6.7 billion in commercial loans alone. China has agreed to roll over a part of its debt in an arrangement with the IMF, whereby the loan is not counted as part of its debt, as has the UAE with its own deposits of $2 billion, and Saudi Arabia with its $3-billion-plus loan and an extended oil facility of a reported $2.4 bn.
All this looked good on television. But the catch is the payback. It appears that the present ordinance is the result of the UAE rather understandably refusing another loan, and the subsequent offer to sell power plants to the country.
China is reported to have been given an extended lease of mineral-rich areas of Kohistan in the far north. It is unclear what the Saudis may ask for. They have the rare distinction – if it can be counted as such – of having not only visited Pakistan’s most sensitive nuclear installations but having also funded the programme to the extent that Pakistani deterrent was viewed by western observers as being ‘rented’ by Riyadh. Recent imagery also alleges that China is providing the kingdom with its own ballistic missile capability. All of that seems to rather knit things together into a – quite literally – explosive pattern. Remember, there are no freebies in life or international relations.
A Sorry State
Meanwhile, Imran Khan has decried the ‘sale’ of state assets by ‘thieves’ in a government ‘imported’ from the United States. That’s hugely ironic since the blame for the present sorry state of finances can be laid directly at the door of Khan himself. The Pakistan Economic Survey 2020-21 points out that total public debt crossed $44 trillion by the end of his term. That is backed by the figures from the State Bank of Pakistan, which show clearly the ballooning debt and liabilities that Khan saddled his country with, despite coming to power on a promise to cut Nawaz Sharif’s alleged liberality.
And don’t forget that Khan slashed fuel prices at a time when the rest of the world was raising them. It won him popularity and denied Pakistanis their chance. Despite these facts and figures, which presumably are known to every Pakistani, the Pakistan Tehreek-e-Insaaf (PTI) won 15 out of 20 seats in the Punjab by-election, illustrating certain fundamental truths and a surprising new twist. First, the military did a great job of painting the Sharifs red during the whole ‘Panamagate’ scandal, when usually secret government reports were aired and debated endlessly on media. The picture of massive wealth – some of it at least legitimately earned – could not but have turned the stomachs of most Pakistanis.
Second, the military seems unable to reverse its political engineering, That could be because it’s a divided house, as many speculate. While that’s not entirely unusual, their present flapping about is.
The PTI has not just trashed military leaders – while carefully keeping the military itself in its accustomed pride of place – but has also successfully been able to persuade the public that its accusations of an ‘imported’ government are entirely right.
In other words, no one’s believing the military when it says that there is no conspiracy at all. And finally, while the PTI has used social media with finesse, there is also the enduring truth: pinching the pockets of your voters can be bad for your political health. Inflation has reached its highest in 14 years, and there are no indications that it is likely to subside.
A Lesson for Others?
Will Pakistan collapse? Probably not, given that it is not a country that has no natural assets and strengths.
True, it has been unable to harness its large agricultural lands to push up production, because no government has ever tried to set this right. But a new one could begin that task. After all, it has some 22 million hectares to play around with. That’s nearly the size of Cambodia.
True also that it had begun to rely on foreign assistance in the 1960s, just as India had with a ‘food for peace’ programme, more commonly known as ‘PL-480’. India went on to start a ‘Green Revolution’. Pakistan did the opposite: it taxed and squandered its potential. But with the right assistance, things could have been different.
Uneasy economics also meant uneasy politics in India. Remember that Lal Bahadur Shastri’s short-lived government in the 1960s saw three no-confidence motions and adjournments galore. India stabilised eventually, though not always. Pakistan went on to see military rule.
The lesson here is obvious. The military has to allow some institutions to emerge from this mess. It could. There is no lack of brilliant Pakistanis wanting to make a difference. Some of them may even be politicians.
In sum, Pakistan, given its size and potential, can make a turnaround. But only the country itself can solve its present political mess.
Shehbaz Sharif has the capability to take leadership. But he won’t. His party is already in shambles in Punjab, where the PTI-backed Pervez Illahi ousted his son Hamza Sharif. If a national election is declared, no party will opt for badly needed unpopular measures. And while the army is in some confusion, there is nothing to indicate that it is prepared to take a backseat and allow institutions to grow. If these two main factors are addressed, there is hope.
No Time to Rub It in
Meanwhile, the spectre of Sri Lanka persists. Bangladesh, once seen as a model state, has now turned to the IMF for a bailout package for the first time in decades as its foreign exchange reserves run out in the face of the economic battering that is the result of the Russia-Ukraine war.
The Indian rupee has also taken a beating. A leading media house quoting a study of some 300 firms shows a 200-300-point drop in profitability. Sure, we have foreign exchange reserves in plenty, but they are not born out of exports and can fly these shores at any time. This is no time to crow over Pakistan’s mess or rest on past laurels. The Green Revolution that saved India, for instance, is now the reason for falling productivity as vested interests prevail and dynamic ideas are resisted.
Other reforms have gone the same way. In simple words, you may have the resources, but you just get the country you deserve. Pakistan is learning this the hard way.
This is no time to sink together. The Ukraine war is already doing that for us and our neighbours. Bite the bullet, or face it.
(Dr Tara Kartha is a Distinguished Fellow at the Institute of Peace and Conflict Studies (IPCS). She tweets @kartha_tara. This is an opinion article and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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