Imran Assumes Office with an Empty Treasury

While Imran Khan has been measured in his references to India after he emerged as the front-runner to be the next Prime Minister, one has to watch out for statements and actions from two ‘unguided missiles’.

Published: 19th August 2018 05:00 AM  |   Last Updated: 16th August 2018 10:36 PM   |  A+A-

While Imran Khan has been measured in his references to India after he emerged as the front-runner to be the next Prime Minister, one has to watch out for statements and actions from two ‘unguided missiles’. Shireen Mazari, slated to be the Defence Minister, is on record of having promised to set Indian urban centres on fire, with nuclear attacks. Former Foreign Minister Shah Mehmood Qureshi was not exactly restrained in his barbed comments after the 26/11 terror strike by the Lashkar-e-Taiba. 

India would have to be careful before rushing in with any ill-advised initiatives, before getting a realistic appraisal of ground realities in Pakistan. After the Army-led, judiciary-backed, unceremonious exit of Nawaz Sharif, Imran would have been advised to constantly seek prior Army approval before any action on relations with India, Afghanistan and the US.

While Foreign and Security policies will remain under Army supervision, the other serious challenge that Imran will face is on economic development, at a time when Pakistan’s foreign exchange reserves are steadily dwindling. Pakistan has placed much faith in the $62 billion ‘aid’ package from China, for the much-touted ‘China Pakistan Economic Corridor (CPEC)’. The terms and interest rates of Chinese aid for such projects, whether in Pakistan, Sri Lanka, Myanmar, or Malaysia, are such that the recipient countries find the debt repayment burden unbearable. Unable to repay loans, Sri Lanka was compelled to hand over control of its Port of Hambantota to China.

While loan repayments to China will soon commence, Pakistan has already been hit by a shortage of foreign exchange, even for routine and essential imports. China occasionally doles out loans of $1-2 billion, as symbols of solidarity, as it has just done after Imran was elected. This hardly addresses the larger balance of payments problem. Saudi Arabia has, likewise, reportedly promised a Bank Loan of $4 billion, which would, no doubt, compromise Imran’s grandiose plans of building new bridges with Iran. 

Like his predecessors have done over a dozen times in the past, Pakistan’s Finance Minister (Designate) is preparing for a bailout, by the IMF, amounting to an estimated $12 billion, to set its economy in order. Such a bailout would not be possible without American concurrence. But, Secretary of State Mike Pompeo made it clear that the US will take a decision only after discussions with the new Pakistan Government.

This assertion by the Secretary of State has set the cat among the pigeons in Pakistan, as the Pakistan Government has been less than transparent about what its repayment liabilities are to China and how it will repay the huge Chinese loans. It has been estimated that the repayment of the $62 billion of Chinese aid over the years will amount to $90 billion. Pakistan’s current Foreign Exchange Reserves have been estimated at $10.87 billion. 

In these circumstances, the IMF will closely scrutinise the cumulative impact of various Chinese loans, estimated at $62 billion. Since the army, despite manifestations of public concern, has backed the entire CPEC project, the Pakistan Government will find it difficult to provide the level of transparency the IMF and many of its members like the US could ask for. India’s Executive Director in the IMF would no doubt be advised to keep a close eye on the project costs and repayment schedule.


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