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Is Pakistan going to revalidate its foreign policy, terror honesty and global misadventures?

Islamabad will be forced to recalibrate its foreign policy, terror-sincerity, global misadventures, and rein in those institutionalized trends that have changed Pakistan's narrative to its present destiny.

Is Pakistan going to revalidate its foreign policy, terror honesty and global misadventures?Pakistan found itself situationally in an economic quagmire that was reminiscent of India in 1991. A deadly combination of past economic mismanagement and adverse external factors precipitates a possible recession that could lead to desperate action.

The situation of 1991 was triggered by the increasing fiscal imbalances of the ’80s which had reached an alarming stage of unsustainable deficit rates, corollary devaluation, and a serious crisis of investor trust. The Gulf War had worsened the spiraling oil-import bill situation. The net result was a deeply depleted forex reserve that could barely fund critical imports for three weeks. The imminent crisis had all the possibility of an humiliating sovereign default in debt repayments.

Amid the many desperate measures launched, the IMF created a tactical, although inadequate, tranche that acted as a short-term breather. In view of the prevalent perception and systemic rigidity of the Indian economy, multilateral agencies shied away from further assistance, as did the possibility of borrowing from other countries. The Chandrashekar government then admitted in an audacious and unprecedented move that it had run out of time and options – moved a plan to pledge sovereign gold. The successive government of Narasimha Rao, with Manmohan Singh as Finance Minister, recognized the severity of the situation and the dire consequences of not persisting with the revolutionary plan, pledged 46.91 tons of gold to lift the tide-over revenue. This crisis also carried the crucial ‘liberalization’ blessing that soon led to structural reforms, advantages, and elbowroom to unleash the Indian economy with the much-needed agility, prudence, and cumbersomeness. Then the government repurchased the promised gold and, 18 years later as prime minister, Manmohan Singh’s government bought 200 tons of gold to boost and diversify the national assets in a glorious circle of irony. India today sits comfortably with more than $400 billion in forex reserves and over 570 tons of gold reserves. The story of Indian economic reforms, option-management and recovery holds crucial lessons for Pakistan as it is going through an eerily similar crisis.

Pakistan is in reeling under $100 billion of crushing foreign debt. The Pakistani Rupee’s devaluation due to balance-of – payment issues has occurred four times since last December, leading to more inflationary pressures on the common man and debt servicing is the immediate concern from now on.Pakistan theoretically needs an estimated kitty of $12 billion to tide-over its sovereign obligations and hence the regular stop-over in ‘warm capitals’ like Riyadh (ostensibly to attend the ‘Future Investment Initiative Conference’) and frenetic parallel negotiating for its historic 13th International Monetary Fund (IMF) package.

Nevertheless, unlike the Indian crisis of 1991, the Pakistanis have to contend with the additional angularity of strategic pressures from the US (increasingly hesitant, assertive and still the main donor to multilateral agencies like IMF), on the basis of a bail-out package for Pakistan. The US has understandable concerns about the debt-servicing woes of Pakistan , particularly if they are about honoring the investments linked to China-Pakistan-Economic-Corridor. US Secretary of State Mike Pompeo’s no-holds-barred warning that it will be ‘watching’ IMF transaction to Pakistan as ‘there’s no reason for IMF tax dollars — and correlated with that, American dollars that are part of the IMF funding — for those to go to bail out Chinese bondholders or China itself’, complicates matters for Islamabad, as it does have a significant China-related debt aspect. In addition to the IMF, the Chinese and the Gulf Sheikhdoms are the only two other outlets of Pakistan. In the last fiscal alone, China has already lent $5 billion, while Riyadh has recently pledged a $6 billion package ($3 billion to resolve the immediate balance of payments problem and another $3 billion in deferred oil payments for one year). Crucially while Riyadh was fighting its own insecurities and international image concerns following the Jamal Khashoggi affair, Imran Khan ‘s role and staunch engagement in helping the Saudi propped, International Military Counter-Terrorism Coalition has given the Saudis, a much-needed reassurance. In the Kingdom, the Pakistanis have a contingent of their military to defend the ever-wary ruling Saudi family.

The Pakistani military portion had been instrumental in seizing the Grand Mosque in Mecca in 1979. Today both the Saudis and the Pakistanis are worried about their broken relationship with the US, and in that sense, a quid pro quo of financial aid, in return for guaranteeing security is an imminently plausible barter. Imran Khan would want to minimise the package from IMF, as the conditions attached to the IMF package could jeopardise his political aspirations of an ‘Islamic welfare state’. Already the word ‘duplicitous’ has been affixed to the Pakistani narrative as far as the US is concerned, and the same has been verified by the global money-laundering monitoring agency, Financial Action Task Force, which has put Pakistan to its ‘watch list’. Considering the scope, severity and the previous track record of its national handling – much more comprehensive, systemic and far-reaching changes in the Pakistani governance will be needed to steer it back from the brinks of definite disaster. Besides the obvious tightening, disciplining and ‘liberalising’ of its struggling economy, Islamabad will be forced to recalibrate its foreign policy, terror-sincerity, regional misadventures and rein-in some institutionalised tendencies that have regressed the Pakistani narrative to its current fate.

The ‘free world’ and the multilateral institutions are gradually mandating corrective sovereign behaviours, strategies and democratic values, before making commercial commitments. The cheque-book politics of the Saudi’s and the Chinese are a lot more transactional and simple in the short-term, but, in the long run, it runs the risk of a ‘debt-traps’ that could have humiliating repercussions for the recipient country. So far no break-through policy-correction announcement in the area of economic or foreign policy has emanated from the PTI government. Imran Khan has the political numbers and time on his side to make the hard-decisions and course-correction, but only time can tell if he can do what India did in 1991.

(The author is former Lt Governor of Andaman & Nicobar Islands and Puducherry. The views are strictly personal)

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