Imtiaz Rafi Butt
As the new PTI led Government comes to grips with the complexities of tackling the national economy, Imran Khan and his team have managed to acquire yet another chance for the country. Just four weeks ago, the economy was on the brink of collapse. Pakistan could afford only two months worth of imports and was unable to pay back debt payments. From that point onwards, the country has come a long way in the turn of events in November 2018. There are multiple hurdles like corruption, internal and external debt, the government bodies in losses, low tax net, smuggling and a host of other problems that need serious intervention and the new Government seems committed and in high spirits, and that too for cogent reasons. From the point of financial insolvency and the decision to go to IMF for a bail out, Imran khan and his team kept looking for alternate financing sources. After two attempts, the Saudi Government agreed to give a financial nudge of around six billion dollars. All this was done to reduce the exposure to structural adjustments of IMF and reliability on more than one source of liquidity. The Saudi Government also promised huge investment into uplift of Gwadar and industrial zones across Pakistan. But this was merely a straw compared to what was required to save Pakistan’s economy. Aware of the facts, the new Government sought relief from the Chinese Government and the reply did not come as a loan or bail out but much more.
Imran khan and a team of public and private stakeholders have made an astounding trip to China. The visit conducted by Xi Jinping, the President and the Li Keqiand, the Prime Minister. As a high point, Pakistan managed to sign fifteen MoUs with the Government of China. These agreements cover a wide range of fields such as trade, commerce, industry, technical education, services, banking, construction, cultural ties and military assistance. China unveiled a special program for students of Pakistan who wish to study in China. The plan is to double the number of students which stands at twenty five thousand students annually. Another important step in the same sector was the inauguration of Youth Communication Committee which will establish first-hand and direct contact between academic experts and students from both countries. Similarly, the MoUs are aimed at projects that have never a part of bi-lateral ties between these two countries, such as, the space project 2012-2020. It is a unique and ground-breaking achievement indeed.
In terms of trade and commerce, Pakistan and China have set their sights on lowering dependency on dollars and have implemented a currency swap of around 20 Billion Yuan which is an equivalent of 351 Billion Pakistan Rupees. It will take off a hefty burden of foreign exchange from Pakistan and rationalize the utilization of dollar in trade. A currency swap is smart way of removing another non-tariff barrier. Two countries that are regional partners have a lot to gain. A currency swap simply raises the demand for both currencies in the open market while hurting the undue favour to the dollar. It will save cost of doing business for Pakistani traders while making exchange of goods and services, easier to manage for Chinese banks. The talks and joint sessions between Imran Khan and Xi Jinping are worthy of notice. The Chinese Government acknowledged Pakistan’s efforts in countering terrorism in the region and projected a three-pronged strategy to move ahead. In the words of Xi, Pakistan and China will become even stronger allies when they will unite against three major challenges, namely, 1- Extremism, 2- Terrorism, 3- Separatism. Imran khan, for the first time ever, openly conveyed the objectives of the new Government to Chinese counterparts. He stressed that he was keen on learning from China, the way they have lifted 700 million people from abject poverty in less than 30 years. To this, the Chinese government openly offered poverty alleviation techniques and projects. It must be borne in mind that Pakistan has never been offered assistance in professional poverty alleviation matters while programs of the past like Benazir Income Support Program have barely achieved their objectives. The first few years, poverty alleviation demonstration projects will be initiated at once, as a pet rule, the implementation is to start from the most poverty-stricken areas of Pakistan. It is a pioneer program never seen before. Perhaps the answers to dilemmas of Pakistan on helping the poor are to be found not in the West but right here in Asia.
The Prime Minister Le Keqiang stressed the fulfillment of CPEC projects. In earnest, it has been decided that the 8th meeting of the Joint Co-ordination Committee will be held before end of 2018. The political point scoring and confusion that riled up rumours against CPEC being lopsidedly against Pakistan have been white-washed. Pakistan needs the business activity that will be generated as a result of a 60 billion dollar investment. Imran Khan praised the Belt and Road Initiative and removed all confusions. Pakistan is fully committed to the BRI and Gwadar will become the focal point of trade in Asia. The completion of Gwadar and its full potential were highlighted time and again by the Chinese officials. By 2020, Gwadar is set to become the hub of imports and exports and a formal revival of the Silk Route. The taxes and freight activity alone will be a major boost to the dwindling economy of Pakistan. On the other hand, it is of equal importance to China as being the head of the Road part of the One Belt One Road Initiative. China’s survival is also tied to CPEC and OBOR. The cost of Chinese exports will be significantly reduced as a result of Gwadar and that will in-turn keep the Chinese economy in a boom while the rest of the world, especially the West, moves in a deep economic recession.
On the flip side, there are always those who look at the weaker points and criticize. Western experts are of the view that Pakistan went to China with a plea for loans and funding, which was actively denied. To this, I would only say that yes, maybe, the request for funds have not been accepted but China being a time tested friend has offered much more in return. As they say, prosperity can only come from Trade and not Aid. The combined effect of Saudi and Chinese assistance has given the country another fighting chance, the IMF bail-out will not cripple the internal controls as previously thought, all possibilities are open for Pakistan. With high hopes, this is the last time we will ever need foreign funding to avoid bankruptcy.
—The writer is, Chairman Jinnah Rafi Foundation, based in Lahore.