No Free Lunch, Friends Warn Pakistan, Want ‘Reforms’
The International Monetary Fund (IMF) is delaying its 24th loan, and the Saudis and the UAE have warned Pakistan that they will no longer serve free lunch. Pakistan must introduce reforms and push them to the last. The Gulf friends delivered this message to Prime Minister Shehbaz Sharif and the new Army Chief, Gen. Asim Munir, who visited earlier.
The warning comes as Pakistan is currently gripped by the chicken-and-the- egg syndrome. Its economic woes are caused by its bad politics – or, the friends ask: is it the opposite?
Also left worrying is the United States. But together and/or separately, friends can only offer economic help – there is no real solution to Pakistan’s political power game.
The zero-sum political game between Sharif and his predecessor Imran Khan is hurtling down the nation on the path of a likely election in the summer of this year. But far from offering any lasting solution, the faltering economy screaming for urgent redressal is bound to go into a further tailspin.
For a change, and temporarily if at all, the military is keeping away, although nobody believes it is ‘apolitical’ and ‘neutral’ as it claims. Even these claims in public have gone silent, leaving the squabbling politicians and an inept bureaucracy to handle a bad situation, widely seen as going worse.
The US has confirmed its ‘concern’ about Pakistan’s economic instability. “This is a challenge that we are attuned to,” State Department spokesperson Ned Price said on January 19.
The indication from Washington is that the Biden administration cannot do beyond what it has done to support an International Monetary Fund (IMF) loan that Pakistan desperately needs. That doesn’t necessarily soothe frayed nerves in Islamabad. The loan has been delayed for several months now, and the beleaguered Sharif Government has surrendered, dropping all its protectionist, populist measures, hoping for an early release of the loan amount.
This has expectedly sent the prices of essential commodities high and Pakistan, battered by floods in its farmlands last year, is gasping for even wheat flour. Pakistan does not have the dollars or the means to feed its people beyond a few weeks.
The vicious grip on the economy gets complete as the exchange rate is
primarily hit hard by a steep decline in the central bank’s foreign exchange reserves, now shrunk to a near nine-year low of $4.34 billion. There have been no significant inflows since June 2022 when China provided $2.5bn.
Actually, nobody outside can solve Pakistan’s battle against a weakening rupee, rising demand for an elusive dollar, falling foreign remittances, stunted exports and more, when its politicians fiercely fight each other and involve as per their need of the moment, state institutions like the top judiciary, the election commission and investigation agencies.
Thanks to the uncertainties spurred by political shenanigans, “blood bath” on the bourse is almost a daily occurrence. The stock market is on the decline and fell 3.5 per cent on January 17, to close at 38,342.21 points.
Currency experts said the rupee has been falling “despite being managed by the State Bank of Pakistan (SBP)”. The actual value of the dollar is very different in the grey market. As a result, the remittances from Pakistani workers abroad come through informal channels like the ‘hawala’ that offer higher rates.
“A steep decline in the foreign exchange reserves has caused irreparable loss to the economy and eroded business confidence,” Dawn newspaper quoted a senior banker.
Bankers believe the country would soon notice the shortage of petroleum products and basic essential items like food. Some experts also hinted that the shortage of dollars could cause rationing of petrol and diesel in the next two to three months, ultimately hitting the trade and industry and even the agricultural sector, which needs diesel during the harvesting season. In sum, Pakistan is facing existential multi-dimensional crises of politics and economy with a highly dysfunctional state. It is about much more than democracy and debt. Short-term fixes and political engineering may not work this time. The country needs a radical break from the past policies but nobody wants to do it. Hence Pakistan could sink deeper into the quagmire especially if the IMF programme is not resumed within the next few weeks. (ends)