Who’s to blame for Pakistan’s economic mess? the politicians or the Pakistan Army?

Pakistan does need a serious structural economy as there is no taxation worth the name in the country, especially for its elites and its armed forces. This has led to a large alternate economy which thrives on drug trade with the military’s blessings

Updated Feb 11, 2023 | 12:18 PM IST

Pakistan Economic Crisis (File image)

Photo : AP
Even though Pakistan i officials claim that they have secured an IMF bailout of $1 billion dollars – a pittance for a $350 billion dollars economy - most observers would agree that Pakistan is in the biggest economic black hole that it has ever been in, since its creation. And this bailout isn’t going to change the state of affairs in this nuclear armed State. The reasons are clear, and the finger must be pointed toward the Pakistan military and not to hapless politicians like prime minister Shahbaz Sharif. And here’s why: though its defence budget is officially 25% of their federal budgetary allocations, but in actuality, if we count the money that goes – unaudited - to a number of Foundations that the military runs and pays no taxes on, it would be in excess of 50% of the budget. And no prime minister is allowed to question or tamper with it. And if they do dare to try, they’ll be pushed out, if not hanged for treason!
The country does need a serious structural economy as there is no taxation worth the name in Pakistan, especially for its elites and its armed forces. This has led to a large alternate economy which thrives on drug trade with the military’s blessings – that generates $20 billion or more - and the money that’s sidelined from the funds that Pakistan receives from its friends in the Gulf and China for now, and from the US in the past. The country has astutely leveraged its strategic location historically, whether it was as a launch pad into Afghanistan, or even as a rival to India in the Cold War years. Thus, huge sums of money poured in to support Pakistan, making it a ‘rentier state’ as Ajay Behera of Jamia Milia University has called it recently. It means, Pakistan had received financial and military aid, as it allowed a super-power like the US to use Pakistan to serve its strategic agenda (as America did in Afghanistan).
Thus, Pakistan has had a dependence on aid built into its economic plans. Reports tell us that between 1950 and 2010, Pakistan was given over $67 billion dollars, to support America’s Cold War aims. And then in addition, after the 9/11 attacks in the US, when the US drew Pakistan into its fold again, it poured in over $30 billion dollars into Pakistan, to help the US fight their ‘war on terror’ in Afghanistan against Al-Qaeda and the Taliban. It took the US a decade to realize that deceit was part of Pakistan’s strategic games, when America’s special forces eliminated Osama bin Laden, inside Pakistan near the Kakul military academy. But Pakistan’s feigned ignorance and the security establishment in Washington bought their line. Perhaps the US wanted their ‘war’ in Afghanistan to allow its military industrial complex with a battle ground, or continue to give its hawks a chance to eradicate Al-Qaeda and the Taliban, till it withdrew.
But Pakistan’s new benefactors, the Chinese, are not as naïve as the Americans, and their model of diplomacy is different from America’s ‘kick butt or kiss butt’ approach. China steadily enters a country through its ‘debt trap’ diplomacy, like it’s done in Sri Lanka. And though it has ploughed in over $ 60 billion dollars into Pakistan as part of the China-Pakistan economic corridor, with a deal that former PMs Nawaz Sharif, and the army, claimed would transform Pakistan. Transform it did, though not economically, but into a ‘vassal state’ of the Chinese. Pakistan has now asked Beijing to renegotiate its loans, and their power purchase agreements with China. But China has refused to budge. So, it has to pay up to $1.1 billion to Chinese IPPs for power purchases, or probably hand over some more territories or assets to China, as it has done in the past, when Pakistan ceded the glacier rich Shaksgam valley (part of territories claimed by India) in 1963 and the Gwadar port in 2013. More recently, China has invested (about $26 billions) in water storage dams in Gilgit-Baltistan. Pakistan now owes in excess of $87 billion dollars to China, as per reports.
Thus, Pakistan’s economists are hard put to find a way out of the current mess, where it needs at least a billion dollars from the IMF to pay for the imports that are waiting at Karachi harbour – although some would’ve rotted by now – as Pakistan survives largely on imports. But the bigger challenge for Pakistan is to raise at least $ 30 billion dollars a year to survive, wrote Ajay Behera recently. The IMF says, the current Shahbaz Sharif government in Pakistan must raise and levy more taxes, and perhaps a GST on all the sales across the country – like in India – could be a way out. One step suggested by a recent study is for Pakistan to cut down on electricity tariff and the subsidies to electrical distribution companies. But here lies another challenge. Most employees of Pakistan’s electricity distribution companies are ex-servicemen, and their salaries are regulated by the armed forces, through the Foundations that the military runs!
The other equally big challenge for Pakistan is how to keep funding all the so-called Jehadis that have kept up their agenda on Kashmir alive. The current slump in the economy of the country is also due to decades of faulty support for extremism and terrorism. Pakistan has become a lesson in how the political economy of a nation that rears extremism, indulges in state-sponsored terrorism, has no growth and development strategy and has utter disregard for the welfare of their common citizens, eventually collapses. Thus, Pakistan has hardly ever focused on long-term economic growth and showcased short-sightedness in waging a war, direct or proxy, with India.
And to top it all, the rise of terrorist groups such as Tehreek-e-Taliban Pakistan, earlier backed by Pakistan's army and intelligence agency ISI, is a big challenge for the Pakistani state, as it is now waging a war against the Pakistani state itself, killing innocent civilians and law enforcers. Pakistan is now a state at war with itself. This should worry India, because the Pakistan army – cornered by their country’s economic plight and as the popular support for Imran Khan grows – could resort to another military adventure against India, as their oft-trusted distraction, from the mess within.
Disclaimer: Maroof Raza is a guest contributor. Views expressed are personal.
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