Pakistan’s epiphany: A hidden guile

Throughout 2022, Pakistan saw adequate drama to compete with any reality programme of any OTT platform — from Imran Khan becoming the first PM to be booted on no confidence vote to Bajwa’s superannuation and military facing an unprecedented populist offensive to Pakistan entering an economic shambles and the ISI-TTP relations going kaput. The deteriorating ISI-TTP relation resulted in 56 fatalities in December, which was the worst month in more than ten years. The TTP carried out 376 terror attacks last year, 533 people died and 832 others were injured. People have urged the government to act forcefully against the TTP. The worsening conflict between Pakistan and the Afghan Taliban is like a patron-client relationship going sour. The multifarious crisis Pakistan is currently witnessing is possibly the worst since 1971 when it split up following the Bangladesh conflict. For the political and military elite in Pakistan, the crisis is overwhelming, and there is a general feeling of being lost.

With barely USD 4.4 billion on hand right now, Pakistan's economic condition has forced the PM to walk the tightrope. The current crisis is not the making of the Sharif government, but Sharif has a political future and is making what seems to be a desperate move. The ongoing economic crisis may be a result of a number of recent variables, like the post-pandemic super cycle in commodities, Russia's invasion of Ukraine, the US Federal Reserve's change in policy, and catastrophic floods at home. But offering an olive branch to India is a hoax; he is in a conundrum to make the IMF pill less bitter, as the World Bank and the IMF have judged that Pakistan cannot be granted fresh loans without first implementing long-term measures to promote macroeconomic stability. On the northern front, the TTP and the Afghan Taliban have run through to Pakistan. The ISI viewed the Taliban’s victory in Afghanistan as an opportunity for dominating Kabul, which provided Pakistan with a significant "strategic depth. Islamabad might have believed that by installing an allied militia in Kabul after the Taliban gained control in Afghanistan in August 2021, it had achieved its intended policy goals. Pakistan expected that it would now be able to handle the TTP dilemma more successfully. But the Taliban apparently began to oppose Pakistan meddling in its internal matters. Now the client is biting its benefactor brazenly, and Islamabad has no choice other than to counter the TTP.

Pakistan’s foreign exchange reserves are now hard enough to cover three weeks of imports. Islamabad is experiencing its 13th balance-of-payment crisis since 1988 and is currently on its 23rd Fund programme since 1958. Pakistan’s economist, Meekal Aziz Ahmed, wrote 20 years back:

“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 have 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.”

Things have become much worse in the last two decades and, in 2022, Pakistan remained in the grip of the foreign exchange crisis.

The relationship between the US and Pakistan is also going through a rough patch. It had deteriorated when Imran Khan accused Washington of arranging the opposition's vote of no confidence against him in April last year. Now Shahbaz Sharif’s change of heart to mend his ways may have brought a sense of surprise to many in Pakistan and India, though this epiphany of Pakistan has proved to be a hoax. India has not shown any flexibility, and rightly so. This is an attempt of Sharif to earn some brownie points, domestically and internationally. He might be writing his own epitaph, as the Pakistani Army and the ISI might not enjoy this. Sharif has committed a blunder and will have to pay sooner or later. It is clear that a more involved and comprehensive strategy is required to deal with the matter. The TTP shouldn't be viewed as a centralised, cohesive force that can be demobilised and massively assimilated into society and politics. This is particularly true when the militant group is primarily recognised as standing for an ideology. To rectify its economic woes, Pakistan needs to initiate reforms to address its underlying structural issues. "Borrowed growth" has caused much damage to the country’s economy.

Dependence on the West has been replaced in recent years by reliance on close strategic allies — China, Saudi Arabia, and the Gulf nations — who have given the country financial assistance to help it through economic and liquidity crises. Billions of dollars could start flowing in, right away from Saudi Arabia, China, the UAE and international financial institutions.

Saudi Arabia has also hinted that it may spend USD 10 billion in Pakistan in future, primarily in the country's petroleum industry. It has also stated that it aims to deposit an extra USD 2 billion with the central bank of Pakistan.

A USD 3 billion funding contribution from the UAE is planned, which will also include the rollover of its USD 2 billion in SBP foreign exchange deposits. Saudi Arabia also decided to extend USD 1 billion in oil on a payment schedule and refinance Chinese commercial bank loans to Islamabad, and expansion of the bilateral currency swaps. China is anticipated to inject close to USD 9 billion into Pakistan's economy.

The majority of the anticipated inflows of foreign money will just increase Pakistan's outstanding external loans and its yearly debt payment obligations, even if they are expected to continue at varying rates each year. The country could become imprisoned in foreign loans within a few years if it doesn't dramatically raise its export of products and services, reverse the downward trend in remittances, and promote an environment that is conducive to foreign investors. Pakistan taking any lesson seems unlikely, given its entrenched ideology.

The nation's political culture has been so ingrained with the practice of relying on others. This demonstrates the failure of economic governance because it entails the cash-strapped nation lurching from one crisis to another, without being able to prevent the next one, and outsiders are regarded as band-aid solutions to its enduring economic issues. Above all, this strategy reduces the nation to the regrettable position of a supplicant whose ability to support its own economy rests on others rather than on itself.

The writer is a senior journalist. Views expressed are personal