Rescuing Pakistan’s economy

Shahid-M-Amin.jpg

Former Ambassador Mr Shahid Amin

When Imran Khan took over as Prime Minister, he inherited a near-bankrupt economy. There was barely enough money to finance one month’s imports. The external debt had gone up to $91 billion in mid-2018, compared to $33 billion in 2004. In the intervening period, the PPP ruled from 2008 to 2013, and PML (N) from 2013 to 2017. There was gross mismanagement of economy, compounded by corruption, which led to this huge debt burden. Imports went up sharply and exports came down, creating a grave balance of payments situation. The internal debt rose from Rs 6,000 billion to Rs. 27,000 billion in the ten-period till 2018.
Imran Khan’s new government found that $12 billion were urgently needed to meet external payments. A desperate situation required desperate remedies. It is rank hypocrisy for the opposition, particularly PPP and PML(N), to criticise Imran Khan’s government for taking measures like raising energy prices, and going to friendly countries and IMF for relief. Since his government does not possess a magic wand, how else are the country’s urgent needs for liquidity to be met? These parties criticise Imran Khan for turning to Saudi Arabia for aid, though in the past he had criticised past rulers for seeking foreign help. Had the previous governments not left behind an empty treasury, there would have been no need for Imran Khan to approach friendly countries. It is more pertinent to ask the two outgoing governments as to why they made a mess of the economic situation. Steps should be taken to punish those responsible.
Against this dismal background, the welcome news is that Saudi Arabia has agreed to provide $3 billion to strengthen the balance of payments. Oil worth $3 billion on deferred payment will be provided for three years, making for a total of $12 billion in relief. Imran Khan visited Saudi Arabia on September 19, 2018 where he was given an enthusiastic welcome. Both King Salman and Crown Prince Muhammad bin Salman assured Pakistan of full support and agreed to send high-level teams to Pakistan to assess the country’s needs. A second visit was needed on October 24 to finalise the agreements. This also enabled Imran Khan to attend the publicised Investment Conference in Riyadh. An unfortunate situation had in the meantime arisen when Jamal Khashoggi, a dissident Saudi journalist, was killed in the Saudi Consulate in Istanbul in a premeditated murder. This was most unfortunate and Imran Khan squarely condemned the killing, while stressing the need for an impartial enquiry. But the critics in Pakistan who wanted Imran Khan not to attend the Investment Conference were clearly unaware of, or didn’t care, what negative effect that absence would have had on Saudi-Pakistan relations. This was the time to show solidarity with an old ally and friend. International relations are based on cold calculation of national interests and not on emotions. Pakistan’s pressing national interests took precedence over any other consideration. The timely help from Saudi Arabia underlines why friendship with it remains a pillar of Pakistan’s foreign policy.
Another positive outcome of Imran Khan’s talks with Saudi leaders is their willingness to let Pakistan act as mediator to resolve the Yemen issue, where a Saudi-led coalition is fighting against Iran-backed Shia Houthi rebels. At the bottom is the cold war between Iran and Saudi Arabia. In 2015, there was a setback in Pakistan’s relations with Saudi Arabia and UAE when Pakistan declared neutrality on Yemen. But three years of wasteful military intervention have possibly persuaded Saudi Arabia to look for a way out. It will not be easy for Pakistan to mediate between two great rivals for influence in the Middle East—Iran and Saudi Arabia— but it has better credentials than anyone else to fulfill this role.
Another positive development is that a 15-member high-profile UAE economic delegation arrived in Islamabad on October 26 to meet Pakistani leaders. Led by Dr. Sultan Ahmed Al-Jaber, UAE Minister of State and CEO of Abu Dhabi National Oil Company, it included members from government and private entities, including CEOs of key companies and investment bodies. Al-Jaber said that UAE leadership attached great importance to enhancing historic ties with Pakistan. Crown Prince Sheikh Muhammad Bin Zayed wanted to elevate UAE-Pakistan relationship to a long-term strategic comprehensive economic partnership. Al-Jaber evinced UAE corporate sector’s interest to invest in Pakistan, which had a lucrative market and a special geographic location.
Foreign Minister Shah Mehmood Qureshi revealed that Pakistan had asked UAE for a deferred payment facility for import of oil, similar to that with Saudi Arabia. (Pakistan buys more petroleum products from UAE than from Saudi Arabia.) The Emirati delegation expressed interest in setting up an LNG terminal in Pakistan. There will be greater Pakistani exports of rice, mangoes and citrus fruits. Pakistan could benefit from UAE expertise in processing and packaging of food products. Emaar could help in Pakistan’s plan to build five million houses. UAE holds expertise in water desalination and could invest in a plant in Karachi or Gwadur to resolve our water crisis.
Friendly countries are forthcoming in giving financial assistance to Pakistan. They always realised its importance but were disenchanted with successive corrupt leaders in Pakistan. King Abdullah was cited in WikiLeaks in 2010 as describing Zardari “a rotten head who was infecting the whole body.” Imran Khan is the honest, strong leader that these countries were hoping for. UAE tends to take a lead from Saudi Arabia, reflected in its current willingness to advance economic cooperation with Pakistan.
Foreign Minister Qureshi revealed that Pakistan had urged friendly countries to provide ‘fiscal space’ to Pakistan, so as to counter the tough conditions of IMF. “We may still have to go to IMF but we have to be in a reasonable position. If we are weak, there will be tough conditions.” There are expectations that Imran Khan’s visit to China next week would produce similar positive results. It is clear that through proactive diplomacy, Pakistan has turned the corner. This clearly helps Imran internally as well and has deflated the opposition. Pakistan must consolidate on the breathing space provided by friendly states through raising its exports, reducing fiscal deficit, ruthless accountability and bringing back stolen money taken abroad by the corrupt.
— The writer served as Pakistan’s Ambassador to Saudi Arabia, Soviet Union, France, Nigeria and Libya.

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