Beggars can't be choosers

Mahmudur Rahman   | Published: October 30, 2018 21:35:45

Imran Khan's first speech as Prime Minister was all about how austerity and bringing back ill-begotten expatriated moneys would enable his country to ease out its balance of debt problems. The critics laughed. They're still laughing as first Pakistan seeks a $ 14 billion IMF (International Monetary Fund) bailout, the second in five years and then it seeks and will probably get $ 6.0 billion from Saudi Arabia. Half of this will be deferred payment of fuel, the other to help pay back other loans. In plain economic terms neither is a viable option unless enough can be displayed about where the payback is to come from. Saudi Arabia has the means of ticking off this box as a write-off but will seek significant returns in other forms. Khan's presence at an investment conference (as opposed to a dole-out one) where half of the original participants including the developed world pulled out is a plus-factor. But it's the same moot that IMF Christine Laguarde has boycotted.

The IMF will shortly be engaging with Pakistani officials on terms and conditions none of which are going to be pleasant. Khan himself has said the next six months or so are going to be 'difficult'. In spite of 1.19 million workforce in Saudi Arabia itself, Pakistan's forex reserves are at a dubious $ 8.4 million, miles away from Bangladesh's close to $ 30 million. It has an $ 18 billion deficit and public sector debt at $ 73.3billion is 27 per cent of gross domestic product (GDP). Compare that with the arguments Italy are having with the European Union (EU) in getting them to agree a budget that is not even 3.0 per cent of its GDP, the maximum permissible.

Pakistan's economic mess is one that has been exacerbated by inability and unwillingness to allow private sector growth whilst funding infrastructure and instead concentrating in the losing battle with Afghanistan's Taleban and toothless sabre-rattling with India. Khan has chosen to pull the plug on Afghanistan intervention but the price to pay may be more severe than his anticipation. The United States has now withheld promised economic and military support because Pakistan hasn't done enough. The danger is the US is one of the key purse-string holders of the IMF and can hardly be favourably inclined to bailouts that pay-back debt to China with which it has anything but the best of terms at this moment. Mike Pompeo, the Secretary of State, has been doing a round wherein he is cautioning against accepting Chinese loans.

On the flip-side, Pakistan's relationship with Saudi Arabia isn't one to be sniggered at. That Khan chose to override the Khashoggi debacle for his country is not going to go unnoticed. He will also have been advised that sooner or later the US will have to rethink about reining in the Taleban without Pakistan's support. Khan has left the door open for a partnership in peaceful intervention that doesn't take Pakistani lives and expensive efforts.



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