Foreign largesse drying up

ByNoor Israr

Discerning taste in music and is currently studying development economics at UCF


September 8, 2022

Noor Israr describes a tricky situation

The recent difficulties faced by the finance managers of Pakistan to procure financial assistance to save the country from going bankrupt are indicative of the fact that the foreign largesse that was once available to the coffers of Pakistani state have virtually dried-off and it is now very cumbersome to rely on such financial succour. This situation was staring Pakistan in the face for the last many decades but despite 75 years of its existence, the finance managers failed to deviAse a self-sustaining method of securing the financial sources of the country. Successive generations of national policy makers heavily depended upon the geopolitical advantages the country is blessed with and kept on cashing this fast-diminishing reserve but it now appears to have been finally exhausted.

The rentier state notion through which Pakistani state was financially nurtured started to go sour since the turn of the 21st century as the main props of this assistance namely the United States, China, Saudi Arabia and the United Arab Emirates gradually decided to wean away from Pakistan due to their strategic consideration and yet the policy makers did not heed the warning and kept on believing that these avenues will continue to support Pakistan. During this period, a major shift occurred in the Gulf monarchies and with the emergence of a younger, more globally connected leadership in Saudi Arabia and the United Arab Emirates altered the regional geopolitical map. The Arab monarchies showed that they were more interested in pursuing radical transformation of their economy, society, and foreign policy. In this context, the Abraham Accords radically altered the strategic situation further reducing Pakistan’s strategic value that resulted in the monarchies showing more aptitude for return-oriented financial investment instead of earlier one-sided financial assistance.

Pakistan got a temporary support as China came on to the scene flushed with money and told Pakistan of its intention to grant it monetary support. China gradually emerged as the financial wizard willing to target Pakistan for wetting its toes as a financial power embarking upon a push to expand its global economic influence. Islamabad, given its historical relationship with Beijing, was willing to secure financial largesse from China as its economy was on the brink. Crippled by terrorism and power blackouts, Pakistan needed a saviour which emerged in the form of the China-Pakistan Economic Corridor (CPEC).

CPEC ushered once again the old times but they came laden with complications that proved difficult to iron out. It soon proved therefore that the geopolitical imperatives have lost their crucial value as it soon became evident that a multipolar world was emerging and great power competition was back in vogue. This proved quite a shock for Pakistan as bereft of its rentier status it has nothing to offer to the wider world and with its ever-increasing economic problems the country faced enormous difficulties. It soon was seen that the great power competition between the United States and the Soviet Union that once proved a boon for Pakistan was sadly absent and the real action now was concentrated in East Asia. China had become the new enemy of the West that spearheaded a drive to contain it and divest it of its financial viability.

The first impact of this turn around would entail that the West would target China after wrapping up the Afghanistan war. Signs started to emerge that Washington has taken serious exceptions about Pakistan’s budding economic ties with China and publicly warned Pakistani policy makers to refrain from such cooperation virtually threatening with serious consequences. Adding menace to such warnings, America started to signal that the only country in South Asia that it considered placing as a bulwark against China was India revealing the double-edged intent of such a policy. It soon became apparent that the Americans did mean business as the sword of FATF was hung over the head of Pakistan. Moreover, the gradually toughening conditions of IMF also were meant to browbeat Pakistan into refraining from accepting Chinese financial loans. The pressures exerted by the West on Pakistan jaded Chinese perceptions about its financial role in Pakistan. Pakistani side also faced a state of inertia as payments owed to the Chinese got stuck, projects stalled, visas were not approved, and the security situation deteriorated by the day.

It is more than clear that the Pakistani financial policy makers are left with very few options to alter their perceptions about pursuing economic matters. The ongoing political and economic crisis must be viewed within its entirety keeping historical context in the backdrop. It is more than evident that the myopic perception of running Pakistan as a rentier state without considering that such perceptions are bound to change with the passage of time has ultimately landed the country in the current financial mess. The erstwhile benefactors of Pakistan have now realised the futility of sinking their wealth into an enterprise that has already lost it strategic value and has not been able to come out of the economic quagmire despite plenty of financial resources given to it.

The world is fast becoming multipolar and states cannot rely on their benefactors all the time as they are required to devise their own means of sustenance. Pakistan is now seen as a force multiplier in the current scheme of things and no state wants to engage in such kind of bilateral or multilateral relationship. Unfortunately, Pakistani policy makers have taken an easy way to manage the country’s economy and the situation is exacerbated by the duality of decision making in the country as could be observed whereby the head of the Pakistani armed forces has been witnessed running from pillar to post to arranging funding that is recognised to be the job of political leadership of the country. The Pakistani financial planners have never sought ways to diversify the economic spectre of the country and have left a large void that is required to be explored. It is imperative that different economic potentials are explored and it is simply easier said than done but there is no option but to go for this way out.

The vast sectors of Pakistani economy are open for exploration particularly the maritime sector. Moreover, concentration and investment is required to value-add to all economic factors of production as its absence has badly harmed the Pakistani economy. The structural aspects of the economy also need attention as many economic problems have emerged due to profound malfunctioning of the economic matters. It should be seriously taken into account that there is no point to keep on pursuing the outdated strategic-oriented policies and concentrate on sound economic principles that are followed the world over. It is also futile to find variations of the outdated policies and couch them in intellectual terms.

The need is abject to radically transform the economic outlook of the country. Every citizen should be made to become an economic unit instead of running after petty political matters that is the prevailing national instinct and is required to be shunned. This is certainly a tall order and will take time to come into play but there is no short-cut to this change of method as it is the need of the day. TW


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