Naya Pakistan, Purana Debt Trap: Why an IMF bailout package of $6 billion places Imran Khan in a painful spot
One would not have to go back too long in time to find out that Imran Khan was once absolutely averse to the idea of stretching his hand out in front of the International Monetary Fund (IMF). Yet, soon after he became the PM, Pakistan sought IMF aid.
And now that the primary negotiations have culminated in a workable arrangement of the IMF giving six billion dollars — as against eight billion dollars as initially being talked about — in three years, Naya Pakistan has fallen into the tried-and-tested vicious cycle; the exit route remaining elusive.
Why Imran Khan thought he won’t need IMF
The plan Imran Khan had was to approach friendly countries for loans — China, Saudi Arabia and the UAE have helped Pakistan, both in cash and kind. But that’s clearly not enough. Pakistan has a $12 billion gap in its annual payments.
Meanwhile, Pakistan’s growth rate is set to hit an eight-year low.
A report by the National Accounts Committee has forecast growth of a mere 3.3% in the current fiscal year against a projected target of 6.2%. The country already faces sanctions from the Financial Action Task Force (FATF). The prices of essential commodities have meanwhile skyrocketed and will go up further. More subsidies will be withdrawn.
Imran Khan could not see all this coming — or he was looking for a figleaf to not see what was coming.
In both cases, he will be proved a total failure.
Everyone inherits a broken economy
According to experts, this has been going on for the last 30 years. All leaders have been trying to ‘structurally adjust’ Pakistan's economy. The fact that it could not be done by the PPP and the PML-N governments almost proves that the method is entirely flawed.
But the PTI government chose an apparently suicidal way — it thinks that the IMF package will bring foreign investments. This is not the first bailout package. In fact, this is the 13th one since the late 80s. Did the previous ones bring investments (and no, we are not talking about China and friends)?
Now that the PTI government chose to walk into the same scenario, it needs major magic to get out of the debt trap — before it’s thrown out of power.
China-US playground
You take a loan from one bank. Then, to repay that, you take another loan from another bank.
Why do these banks give you loans? Because you are an important customer.
This is a very old trap. But unfortunately, Pakistan can’t do this anymore — the IMF bailout package can’t be used in the China-Pakistan Economic Corridor — the US, we are sure, will monitor that.
Yes, Pakistan’s position makes it that important customer to the banks. The only difference is that the US and China are not banks — they are global powers running after supremacy.
And Pakistan will be their playground.
Why India must watch out
The playground is so close to our house that we can’t turn a blind eye to the possible repercussions — both economic and political. As Pakistan becomes more and more indebted to other countries, the political landscape of South Asia is bound to change. As a Mint report apprehends, “The last time a big power, the US, had roped in Pakistan in its proxy war against the USSR, sections of Pakistan’s ruling establishment felt emboldened to undertake hostile actions against India.”
Why Pakistan must worry
It is a political and economic quagmire that Pakistan faces now. Getting rid of costly cars or the PM bungalow will not save the situation. Pakistan has been in a similar situation before as well. But Pakistanis — who are perceiving this bailout as a 'sell-out' — will have to pay a much heavier price this time as the IMF bailout includes austerity measures (withdrawal of subsidies, etc.). But it will keep floating.
More worrying is the fact that the chicanery of the PTI government has started to fall off. Probably Imran Khan’s other promises too will soon crumble like this.
For now, all eyes are on Pakistan's Budget this year.
Will the PTI government be able to make people, including politicians, pay tax? Will Pakistan’s Budget make more room for actual growth — and not just military pumping?
Or, will Pakistan's poverty be kept alive to profit some persons — both inside and outside the country?
Also Read: Pakistan is desperately poor. Its army is rich beyond belief. How come?