Pakistani media saw Foreign Minister Subrahmanyam Jaishankar’s invitation to his counterpart Bilawal Zardari for the Shanghai Cooperation Organization (SCO) foreign ministers’ meeting in May as a sign of India warming up to Prime Minister Shahbaz Sharif’s offer to hold talks with India. upside down
Prime Minister Sharif made the conditional offer on 17 January 2023 in an interview with an Emirati channel, Jaishankar’s invitation was sent through diplomatic channels on 24 December 2022. As the chair of the SCO in 2023, it is India’s duty to invite all SCO members ahead of the SCO Summit later this year.
Although proponents of India-Pakistan dialogue and the conflict resolution industry in India have also painted a similar picture to their Pakistani counterpart, there has been no change in India’s bilateral stance with Pakistan. The message is simple: end cross-border terrorism for dialogue and normalization of relations.
Considering the state of Pakistan’s economy and the political current in the Islamic Republic, the main priority of Islamabad is to reduce the financial debts of the nation under siege. Faced with tough IMF conditions for a loan to Pakistan, Islamabad is now calling on Washington to ask the Bretton Woods institution to go soft on the Islamic Republic as it urges Prime Minister Sharif to raise electricity tariffs. and impose more taxes to increase revenue. Such austerity measures would be politically disastrous for the current PDM regime and would help Imran Khan Niazi, a bitter and controversial rival.
Pakistan has not only lost money, but also ideas on how to save a country that is beginning to collapse at an alarming rate. If only the economy was on the brink of bankruptcy, things wouldn’t be so bad. But not only is the economy melting down, politics is also completely polarized and tearing the country apart, social cohesion and cohesion are broken, and the security situation is spiraling out of control due to Taliban belligerence.
The multiple crises facing Pakistan are getting worse day by day as each crisis reinforces the other and there is no clear on-ramp for the current regime. Simply put, Pakistan is drowning, but Pakistanis seem to think they will swim out of these troubled waters because the world cannot see them drowning. But the world does not seem ready to save Pakistan unless Pakistan is ready to help itself. However, Pakistanis are more concerned with the political circus in their country than with the sweeping economic reforms that could pull them out of the hole they have fallen into.
The excesses of Pakistan’s elite politicians, military personnel, civil servants, landed gentry and commercial and business organizations – who have captured the state and its resources – have reached a point where the economy has reached rock bottom. The focus at this stage is on trying to prevent a default that would burn the economy and create an uncontrollable civil and political mess. While there is no doubt that a default would cause excruciating pain, Pakistan’s incorrigible elites are trying to terrorize the rest of the world to ensure that Pakistan’s economy remains afloat. Just as they tried to use the flood as a bargaining chip to get international lenders to cut their slack, they are now using the impending economic collapse as a bargaining chip.
Basically, Pakistan is scaring the world by eliminating the threat of nuclear weapons, brutal radical Islamists and taking over the country in a revolution. Scary though they are, these fears peddled by Pakistan are as exaggerated as ever. Pakistanis may romanticize the revolution, they have no stomach for such a thing, least of all the Islamic revolution, which will give the worst blow to the privileges of the elites.
However, the economy has now reached a standstill. If the IMF program is restarted, it will delay economic growth for several months, possibly until the end of the current fiscal year to June 2023. Pakistan needs about $10 billion in the next six months. With the IMF program, they will almost certainly manage to raise the amount, with the Saudis buying about $2 billion, the UAE another $1 billion, the Chinese a few billion, and Qatar buying assets worth about $2 billion. But this will only last until June.
In the next fiscal year, Pakistan will need another $30 billion or more. Will these friends continue to pour endless money into Pakistan? Currently, the International Monetary Fund has imposed very strict conditions for the reinstatement of the extended financial facility program. The result of these conditions will be not only politically destructive but also financially devastating for the people.
Inflation is expected to rise from 40 to 50 percent as fuel prices rise, electricity tariffs rise and gas rates rise. In addition, the rupee will fall. According to currency traders, the moment the rupee is allowed to float, it will depreciate from the artificial level of 230 to around 260-270. Some analysts fear that the rupee will cross the 300 mark within a few months. This will lead to massive inflation which is already breaking out.
To control inflation, Pakistan should raise interest rates. This will drive the cost of doing business to unsustainable and unsustainable levels. But worse, rising interest rates will wipe out whatever is left of the government’s financial position. There is a real risk that even at the current interest rate of 17%, the cost of servicing the debt will exceed the total revenue of the federal government.
The stark reality staring Pakistan is that default is inevitable. It is not a question of if it will happen, but when it will happen. The only possible option is to seek debt restructuring. But this is almost as bad as a default, as it comes with tough riders that soften the IMF’s current conditions. However, Pakistan’s politicians and military leadership are hopeful that the storm will pass them by.
It is clear that Pakistani elites and generals want the rest of the country to be ready to make sacrifices, but they are unwilling to cut costs or concessions. They want their royal protocol, their golf courses, their vacations in Dubai, send their children to Western universities, receive unscrupulous subsidies from empty government coffers, but the ordinary citizens of Pakistan. They even deny the basic right to life.
Pakistan army is also not ready to reduce its expenses. This country continues to buy expensive weapons systems that Pakistan can no longer afford. To make matters worse, the country continues its strategic adventures on both sides of the border, which have proven to be intolerable. The only way to reduce military budgets is to improve the strategic environment and normalize relations with India and Afghanistan without any legacy conditions and action against terrorist groups based in Pakistan.
However, HQ Rawalpindi, this is not happening because the army is unwilling to make a paradigm shift in its strategic orientation towards India and Afghanistan. In the past, tactical settings created space. Not anymore. New Delhi has wised up to Pakistan’s tricks and feels no need to retaliate against tactical moves that only benefit Pakistan. In any case, the Taliban is now showing its true colors and looks set to increasingly destabilize Pakistan’s western borderlands as well as radicalize the entire region.
Just like the military, the political class is more interested in preserving political capital and securing its political future than saving the country or its future. At a time when the country is on the verge of collapse, the political conflict is strange. Imran Khan wants snap elections which he thinks he will sweep. The ruling combine wants to delay the election as long as it can because it has nothing to go to war with. The military does not want to destroy democracy, but it wants to keep calling. It also doesn’t want Imran Khan back in power, at least not immediately, and is ready to stop him by hook or by crook.
For now, it looks like the government will sign on the dotted line and return to the IMF program. But within a month or two, he will start pouring money into his political support. This means that by the time elections are held and a new government is in place, Pakistan will be in the midst of a crisis even worse than the one it is in. In other words, no matter how you slice it, Pakistan’s economy and with it the current government and political structure is headed for collapse.
