The IMF tightens the vice
Decades of domestic mismanagement in respect of the Pakistani economy appears to have forced Islamabad back to the International Monetary Fund (IMF) for a new bailout to stop Pakistan’s current account deficit from causing a major economic crisis. While Prime Minister Imran Khan recently stated that he will approach three nations (which he did not name) prior to approaching the IMF, further statements from Pakistan’s government indicate that a new IMF bailout may be inevitable. That being said, Pakistan has yet to formally make the request to the IMF.
Even before discussions have got underway, the IMF has already indicated that the terms of a potential bailout could have a stifling impact on Pakistan’s economic growth. Not only would the rigid austerity measures that the IMF is known for imposing represent an existential threat to the progressive Islamic welfare model advocated by the governing PTI party, but furthermore, the IMF has already indicated that if a bailout is made, the Washington based international body might try to meddle in Pakistan’s crucial economic relationship with neighbouring China. This itself could negatively impact the long term growth of the Pakistani economy in relation to the China-Pakistan Economic Corridor (CPEC) which forms an essential artery of the Belt and Road initiative.
The IMF’s Maurice Obstfeld has taken it upon himself to warm of what he calls “risks” inherent in CPEC. While Obstfeld attempted to moderate his remarks by also highlighting the positives inherent in the China-Pakistan relationship, the writing is clearly on the wall when it comes to the US leaning IMF meddling in the sovereign bilateral relations between Pakistan and its all-weather Chinese friend.
Blaming PTI or China is dangerous, futile and dishonest
As a nation that has been an historic exponent of long-term strategic planning, China’s CPEC and related projects in Pakistan were not designed to create a short term economic boom followed by the cycles of economic busts that are inherent in short term thinking. Instead, the fruits of CPEC and related projects will insure the long term sustainable development across multiple regions of Pakistan from Azad Kashmir to Gwadar and from Karachi to Khyber Pakhtunkhwa. This was made clear from the beginning by all responsible parties to discussions regarding Belt and Road. To deny this, is to deny reality.
And yet not only is this reality being denied from the more snide quarters of Pakistan’s media, but PTI and Prime Minister Imran Khan are also being blamed for the mismanagement of previous governments and Prime Ministers. Imran Khan has been in office for less than fifty days. As such, anyone suggesting that an economy can be fixed or broken in such a short time period is clearly playing fast and loose with the truth.
Imran Khan was elected specifically to fix the mess that he inherited from his predecessors. The question now should be one of constructive problem solving proposals rather than childish finger pointing at a government that was elected to rectify the ticking time bomb of a major current account deficit that existed long before PTI’s historic election victory.
Bluffing or submitting?
While few individual nations can provide the kind of loans that the IMF is capable of providing, given Iman Khan’s previous “three nations” comments and the IMF’s predictably controversial comments regarding Pakistan’s economically necessary partnership with China, it should not be discounted that in making statements indicating that an IMF deal is inevitable, that in reality the Pakistani government may be bluffing in order to see which side can offer the best deal.
While it is clear beyond a reasonable doubt that Pakistan’s relationship with China is one built on trust, fraternity and transparency, in the world of business, speaking to a proverbial competitor is always a surefire way to inspire a better deal from the other side.
In this sense, by suggesting that one of three nations (or some combination there of) could help Pakistan to avoid the IMF, Imran Khan may well be enticing China to offer Pakistan a cohesive plan that might help the country avoid a controversial IMF loan. As China is obviously one of the three nations Imran had in mind and because the IMF is now openly provoking China by suggesting that some elements of CPEC could fall under an IMF imposed economic axe, Beijing may well be working to avoid such a scenario and working to do so urgently.
In many respects, the contest between the IMF and Imran’s three nations may well boil down to a matter of numbers. In otherwords, because the previous government left Pakistan’s current account deficit in such dire straits, Pakistan may be forced by circumstance to take the biggest loan it can secure irrespective of the source.
That being said, because of China’s desire to maintain CPEC as a bilateral project rather than one that the US could molest through its leading role at the IMF, Beijing may well come to the table and offer Pakistan the right deal, at the right time and most importantly on terms that value Pakistan’s sovereignty and future development in ways that the IMF certainly could not do.
In either case, Pakistan must insure that even if forced to go to the IMF, Islamabad must robustly stand up for CPEC with all the might it can muster. Anything less would represent the gravest of all possible mistakes.