Pak external economic dependencies
compromise its sovereignty

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By Salman Bashir

Pakistan desperately seeks a financial bailout package from the International Monetary Fund (IMF). The alternative is to default on debts and eventual bankruptcy. The budget recently passed by the Parliament had only one objective: meeting the IMF’s conditions. In the name of structural reforms, the IMF has imposed harsh conditions indeed. For a billion dollar plus loan, Pakistan will have to forgo its economic growth and the people will face unprecedented hardships. Inflation is soaring, the tax burden is crushing, fuel prices and utility costs are being jacked up. More significantly, the life from the economy is being squeezed out to primarily meet external debt obligations. 

The question is, how did a nation of over 220 million people come to such a pass? The economic growth rate for the previous financial year was almost 6 percent. Exports and remittances had picked up. Economic activity had rebounded. The only thing that was not carefully monitored was the current account deficit with high imports. Then came the Ukraine war and the rise in fuel prices and the State Bank dollar reserve began dwindling with interests on debt payments becoming due. 

Pakistan’s projected debt payments amount to around $41 billion in the coming years. State Bank reserves are around $10 billion and falling. Private reserves around $6 billion. Moody declared Pakistan’s credit rating as negative. International banks are now reluctant to give credence to Letters of Credit issued by Pakistani banks. This has affected procurement of fuel for electricity generation. Power outages have gripped the country, adding to the woes of people during peak summer season.

Pakistan borrows heavy foreign loans

In the midst of a full-blown economic crisis, there was a change of government that has precipitated a political commotion of severe magnitude. Governance institutions have stalled as state institutions adjudicate high brow notions of constitutionalism, legality, accountability and so many other inconsequential political details at the expense of the essentials of statecraft. 

Within no time, Pakistan seems to have lost its way in the world and its strategic relevance stands hugely diminished. The people revel in conspiracy theories. Seriously and somberly, the nation has lost its will and self-confidence. This is what undiluted democracy does to a society- it exaggerates negative stimuli in the absence of a solid governance framework.

The ills of society are being vigorously debated. Social media platforms provide easy and loud channels to amplify the discontent. A current theme is ‘elite’ capture. It is the elite that have exploited state resources for their own vested interests. Political power is with the elite. Economic wealth is concentrated in the pockets of a few: those who do not pay taxes, live a life of luxury, have no commitment to the motherland and hold dual nationality and foreign assets. It is this particular class that has ruled the country for many long years and skewed the economy and polity in directions that are anti-national. So, what correction can one expect from these privileged few? History would indicate that conditions are ripe for a revolutionary change. But this is Pakistan, where the poor and miserable have abundant patience to wait out their tribulations for rewards in the hereafter.

Pakistan under heady foreign debts

The middle class, which is the agent for change, has been marginalized. The cruel power dispensation foments rogue behavior by state organs. What is the worth of a Parliament that only has its priority securing dole- begging and punishing ordinary people with taxes beyond their just remit? In this sense, Pakistan has lost its real sovereignty. Prime Minister Shehbaz Sharif once said ‘beggars cannot be choosers.’ This is an apt remark on the present state of play. In a deeper sense this reveals a malady that has no easy solution. 

(Salman Bashir is a Pakistani diplomat who served as Foreign Secretary of Pakistan and as High Commissioner of Pakistan to India. Twitter: @Salman_B_PK)