Pakistan’s options for economic crisis
Pakistan’s economy is passing through a very critical situation. Foreign debt has nearly reached US$95 billion. Debt-servicing costs are crippling. Foreign-exchange reserves are at almost the lowest level in the nation’s history.
Exports has dropped, while foreign remittances have also suffered. Devaluation of the Pakistani currency has increased inflation domestically. The poor system of tax collection is a major cause of budgetary deficiency in the form of income and expenditures. The gap between poor and rich is growing rapidly.
No doubt the previous government is to be blamed for much of the economic crisis. Unfortunately, the Pakistani legal system is too complicated and cannot recoup the damage caused to the nation by government mismanagement.
But this is not the first time – every new government always blames the previous government and yet, by the end of its tenure, is found to have repeated the same practices. We Pakistanis have experienced such situations many times. It is time for the National Assembly and Senate of Pakistan to take solid measures to prevent the repetition of such ill-designed practices. They may go for legislation to ensure recovery may be possible in the case of deliberate damage to the nation.
The new Pakistan Tehreek-e-Insaf government is supported by the masses, and the chairman of PTI, Prime Minister Imran Khan, is an honest, brave and sincere leader. We expect him to make bold decisions. Maybe he will face resistance from opposition parties or even within his own party, but he will have to make unpopular decisions once and for all.
In the past whenever Pakistan has faced an economic crisis, it has knocked on the doors of friendly nations, and has been rescued many times. We Pakistanis are thankful to the Kingdom of Saudi Arabia and other friendly nations for extending hands of friendship in the difficult moments of the past.
Pakistan has also approached the International Monetary Fund a few times and been bailed out. The IMF has bailed out many other countries all over the world, as its mandate is to help ailing economies.
In the past, the IMF acted as a painkiller for temporary relief for Pakistan, but just as the painkiller’s impact ended after a few years, the economy became sick again. We need a permanent solution. We need major surgery to remove this cancer so that a healthy economy can be gained, which should be self-sustained and perpetual.
The US is also creating obstacles against Pakistan getting any relief from the IMF this time. We may face tough terms and conditions from the IMF if we do approach it. Although the proportion of foreign liabilities due to the China-Pakistan Economic Corridor (CPEC) is no more than 10% of the country’s overall foreign debt, the US is critical of China’s Belt and Road Initiative (BRI), and thus may not favor Pakistan receiving another IMF bailout.
Pakistan needs to introduce reforms in every sector. In addition to austerity measures, it needs to focus on wealth generation. Import and export policy may be revised with the close consultation of stakeholders, especially with the private sector as the engine of growth. Although PM Imran Khan has constituted various committees and an Economic Council, he needs to refine them and induct the right person for the right job. The country is full of talented and honest professionals.
However, the BRI is an opportunity for all developing countries and especially for Pakistan. Pakistan-China friendship is time-tested, all-weather, and all-dimension. Being a China expert, I am in a position to say that China is very sincere with Pakistan and willing to help. It is a unique opportunity for Pakistan to take off economically and solve this issue forever.
The new government in Pakistan may conceive CPEC projects well, plan CPEC well, negotiate CPEC well, and execute CPEC well. If all’s “well,” it will end “well.”