Pakistan’s financial hangover
“For China, while Pakistan offers a perfect geostrategic location to implement its global “One Belt One Road” project, the revival of the letter’s economy and infrastructure – that involves resolution of the longstanding energy crisis – should also be a concern for Beijing’s own long term economic plans.”
The much stated rebound of Pakistan’s economy has undoubtedly received global attention. The recent appreciation of the country’s steadily growing economic indicators mainly deal with the inflow of large sums of foreign cash, particularly the investment related to the China Pakistan Economic Corridor which is expected to generate growth because of the increase in capital accumulation.
However, there are factors and indicators outside the realm of this growth roadmap that deals with the intrinsic problems of policy making. The bigger predicament in this regard deals with the plausibility of sustainability: Is the current growth which is predicted to give fight to Pakistan’s ailing economy sustainable? What is also concerning is the rapidly rising imbalance in imports and exports where the culture and policy level focus in Pakistan mostly resides with branding of foreign trademarks in domestic economy.
While the current government continues to take credit for the resurgence of the country’s economy by terming growth indicators as historic and unprecedented, the recent inflow of cash loaded with stipulations and return schedules underlines Pakistan’s looming dilemma of steady dependency on foreign aid to paddle the country’s financial system. While the PML-N led government is all praise of improving macro level indicators in the country and views the CPEC as a game changer for Pakistan, it continues to miss the vital element that deals with the growth of “home-grown” economy.
It’s appreciable that Pakistan has been able to improvise on Beijing’s plan to build an infrastructure route in the country which is essentially part of the letter’s global plan to revive the historic Silk Road for commerce. One only needs to look at the basics of how states function to comprehend why/how international economic linkages create political (economic) opportunities and also political (economic) risks for countries. For China, while Pakistan offers a perfect geostrategic location to implement its global “One Belt One Road” project, the revival of the letter’s economy and infrastructure – that involves resolution of the longstanding energy crisis – should also be a concern for Beijing’s own long term economic plans. Therefore, it should hardly be a surprise that Pakistan is attracting international investments due to the current government’s policies or better security; infect the equation is the other way around: arguably, Pakistan was compelled to deal with its security issues – and to some extent governance – for the infrastructure development cannot run in the middle of suicide bombings and instability.
For Pakistan, on the other hand, Chinese money is a much needed respite to salvage the country’s immediate economic future. Moreover, for Pakistan, it also means coming to terms with new regional and global economic realities where Islamabad cannot refuse any supporting hand when the country’s innate development remains overshadowed due to misplaced economic and political priorities. It was only after Chinese money that Pakistan decided to develop Gwadar port or surrounding regions in general. It was only after Chinese capital that the current government vowed to –or felt confident that it can – resolve energy crisis.
“What if China was to scale down its funding spree for it no longer supported its own economic plans? In that case, would Pakistan be able to survive or thrive economically when its own growth does not move an inch without foreign aid that continues to pileup in the form of growing interests and markups?”
In this context what is worrying is Pakistan’s political leadership’s inability to formulate a plan to build an economic future for the country on its own. While the country has unprecedented growth potential, the sustainability of local economy through foreign funded money and terms doesn’t appear feasible for long term development. Look at this scenario: what if in a few years, China was to pull out its money and support from Pakistan due to some alternative regional and global economic and security realities? What if China was to scale down its funding spree for it no longer supported its own economic plans? In that case, would Pakistan be able to survive or thrive economically when its own growth does not move an inch without foreign aid that continues to pileup in the form of growing interests and markups?
Short term and temporary plans such as offering subsidies to different sectors only because its suits political interests of the party in power – in present case the PML-N – is as deficient as not investing on right places such as different components of human development. There is no focus on climate change when the country remains vulnerable to the threat in the form of challenges related to food security and migration. According to a recent study, water scarcity is a bigger threat to Pakistan’s security than terrorism. The same study concludes that Pakistan’s water shortage is so acute that the country is likely to run dry by 2025. The rapidly depleting natural water resources and wastefulness is similarly leaving a negative impact on the agriculture sector: the sector continues to record negative growth in terms of meeting national food requirements and reducing export levels. Furthermore, challenges related to the rapid rise of population, growing imbalance in distribution of wealth and opportunities and rampant corruption also remain among bigger challenges that need immediate attention.
Unless the country’s political leadership changes its economic, political and social priorities, the masses would continue to suffer.