Nothing comes free of charge

January 9, 2019

Undoubtedly Pakistan’s reserves position has enhanced with all the aid that has come from friendly countries. Yet there might still be no way of escaping an IMF program. Nevertheless, despite appreciation of all this help, the government must make certain that the procedure is crystal clear. So far the UAE handout, though welcome, is not vividly clear for the market to digest. The earlier the government explains matters, the sooner the economy can find some sort of direction. In general, speeches made by states-person praise one another and put two-sided ties on a high dais with a variety of diplomatic performances. Nonetheless, once you scratch the surface, you get to the realpolitik, with economic interests lurking around what are presented to the public as brotherly ties and fraternal bonds. Such is also the case with Pakistan’s ties with Gulf States, and we must not lose sight of the underlying realpolitik in the latest round of visits to firm up the financial package, a rewording for the latest spectacle of generosity by Saudi Arabian and Emirate leaders. Earlier in October last year, Pakistan received a $6bn package from Saudi Arabia. And now, deals have been made with the crown prince of Abu Dhabi in his day-long visit. With this visit, Pakistani and UAE leadership have met thrice now in three months. Last week, the two countries finalized the terms and conditions of a $6.2 billion support package to help Islamabad address its recurrent balance of payments crisis. None of the dollars offered to Pakistan in this package come free of charge. The money will have to be returned, with an interest on top of the principle amount, as is the norm in the international market. Secondly, the purpose of this package is to enable the country to pay for its import bill, mostly to entities in China with whom it has started doing business in the wake of the China-Pakistan Economic Corridor projects. Thirdly, like all such packages, this one will also have some strings attached. So, the government is best advised to fix structural issues in the economy so that the country does not need financial packages every now and then. The bottom line is that Pakistan needs to make its economy develop at a rate on which enough employment opportunities can be generated to manage the youth frustration, and it should also be able to pay for this growth without reliance on the international financial institutions or rich countries with generous cash-flows. Just by fulfilling these conditions will the government be able to align its foreign policy with national interests like consolidation of constitutional democracy, upgradation of religious and cultural diversity and fostering of an equal social order.

Government is best advised to fix structural issues in the economy so that the country does not need financial packages every now and then.