Pakistan’s Augean stables

  • Decades of misgovernance batters national policy making

The pathetic state of Pakistan’s economy is not hidden from the world and warning bells are intermittently rung by local economists not on the government’s sleaze fund payroll as well as concerned, and now really concerned, international lenders for the indifferent leader’s benefit, to confront economic flaws head on to avoid a possible default. However, nothing moved the unworried rulers into taking radical action apt to the grim circumstances, and unchecked recourse was had to familiar domestic and foreign commercial bank borrowing. This addiction, combined with chronic afflictions of low foreign currency reserves, sharply widening current account, fiscal and trade deficits, dismal revenue collection and profligate government expenditures, have conveyed the country’s finances into stormy waters with no welcoming shore in sight.

A forced return to the IMF’s dubious embrace seems all but inevitable, with even more stringent conditions attached (even non-economic clauses this time), as the lender would likely be piqued at the reversal of gains made in its$6.2 billion 2013-2016 Extended Fund Facility by absence of Pakistan government’s will and resolve. So, it was not a sudden and total surprise that international agency Fitch Ratings on Thursday downgraded Pakistan’s long-term foreign and domestic debt default to negative with a ‘B’ rating, despite a projected 5.5percent GDP growth rate for FY 2018, despite ‘B’ category normally encompassing economies with 3.5 percent growth rate only.

As if the tricky economy, political instability and election 2018 uncertainty, apart from the ruler’s extrajudicial entanglements, were not distractions enough for sound policy-making, the escalating row (the latest over location and target of a recent drone attack) with a blustering US administration further confounds and compounds a fraught situation. Since President Trump’s New Year tweet, Pakistan has been accused, vilified and threatened to accept and pursue a particular course of action, and its refusal has invited US wrath in the form of aid cut-off, even of Coalition Support Fund payments, apart from the always present and convenient resort to sanctions, human rights and influencing IMF and WB lending. This rapidly deteriorating scenario demands skilled diplomacy working in overdrive with realistic, plausible responses to protect our national interests in a dangerous encircling neighbourhood.