In spite of the fact that Pakistani media has interpreted an invitation extended by India’s external affairs minister to Pakistan’s foreign minister as a sign of thawing relations with India in the wake of Pakistan’s former prime minister Shehbaz Sharif’s offer of dialogue with India, the facts on the ground point in the opposite direction. The Shanghai Cooperation Organization (SCO) foreign ministers meeting will take place in May.
The offer was made by PM Sharif during an interview with a UAE channel on January 17, 2023. The invitation letter to Jaishankar was sent through diplomatic channels on December 24, 2022. It is India’s responsibility, as it will hold the presidency of the SCO in 2023, to invite all of the organization’s members to the SCO summit that will take place later this year.
In spite of the fact that proponents of India-Pakistan dialogue and those working in the industry of conflict resolution in India have also portrayed a similar picture as their Pakistani counterpart, India’s position with regard to its bilateral relationship with Pakistan has not changed. The message is straightforward: putting an end to terrorist activity across international borders is a prerequisite for normalizing relations.
Islamabad’s primary concern, given the status of Pakistan’s economy and the political upheaval in the highly radicalized Islamic Republic, is obtaining finance for debt relief for the country, which is in a precarious position. In response to the stringent conditions that the International Monetary Fund has imposed in order for Pakistan to qualify for a loan, Islamabad has reached out to Washington in an effort to convince the Bretton Woods institution to be more lenient with the Islamic Republic. The IMF has demanded that Prime Minister Sharif increase electricity tariffs and impose additional taxes in order to increase revenue. These extreme measures would be politically terrible for the current PDM leadership, and they would give Imran Khan Niazi, the regime’s archrival and rabble-rouser, a grasp on the situation.
Pakistan not only has no more money, but it also has no more ideas on how to save the state, which is beginning to fall apart at an alarming rate. If the economy were the only thing on the verge of collapse, then perhaps the situation wouldn’t be quite so dire. In spite of this, not only is the economy collapsing, but the political system is also completely split and driving a wedge between the citizens, social cohesion and coherence have been shattered, and the security situation is deteriorating rapidly due to the aggressive behavior of the Taliban.
Because each component crises is supporting the other one and there is no obvious exit ramp for the current regime, the multi-crisis that Pakistan is experiencing is getting worse by the day. This is because there is no clear exit ramp for the current regime. To put it another way, Pakistan is currently in the process of sinking, but the people of Pakistan appear to be under the impression that they will be able to swim their way out of this difficult situation since the rest of the world cannot afford to watch them go under. But it does not appear that the rest of the world is prepared to come to Pakistan’s rescue until and until Pakistan is prepared to help itself. The people of Pakistan, on the other hand, are more interested with the political circus going on in their own nation than with the comprehensive economic changes that have the potential to bring them out of the hole they have fallen into.
The Pakistani elite—politicians, military personnel, civil servants, landed gentry, and business and trade organizations—who captured the state and its resources have reached a point where their excesses have caused the economy to reach its lowest point ever. This is a direct result of their capture of the state and its resources. At this time, the focus is on attempting to avert a default, which will lead to the economy igniting and, in its wake, unleashing an uncontrollable civic and political chaos. If this default occurs, the attention will shift to trying to avert it. In spite of the fact that it is beyond a shadow of a doubt that defaulting on debt will result in intolerable suffering, the unrepentant Pakistani elite is attempting to fear the rest of the world in order to keep Pakistan’s economy afloat. They have tried to exploit the floods as a bargaining chip to convince international financiers to be more lenient with them, and now they are trying to use the coming economic crisis as a negotiation chip as well.
Basically, Pakistan is trying to scare the world by waving the threat of nuclear weapons getting loose and radical Islamists running wild and taking over the country in a revolution. These threats are being used in conjunction with one another. In spite of how terrifying they are, the worries that Pakistan is peddling are, as in the past, grossly overstated. Despite the fact that Pakistanis may have a romantic view of revolution, they simply do not have the stomach for it, especially not an Islamic Revolution, which will hammer elite privilege the hardest.
Despite this, the economy is currently at a standstill. If the program being implemented by the IMF can be brought back on track, it will put off the impending collapse of the economy by a couple of months, most likely until the end of the current fiscal year, which is June 2023. Pakistan will require approximately ten billion dollars over the next six months. They will just about be able to collect this amount thanks to the scheme offered by the IMF, with the Saudis contributing approximately $2 billion, the UAE contributing another $1 billion, the Chinese contributing a couple of billion, and Qatar purchasing certain properties for approximately $2 billion. However, this will only continue until June.
Pakistan will require an additional thirty billion dollars or more over the subsequent fiscal year. Will the same friends continue to provide Pakistan with an infinite supply of financial support? Already, the International Monetary Fund is setting very stringent requirements on countries in order to restart the extended credit facility program. The end result of these circumstances will not only be politically catastrophic but also economically catastrophic for the people.
It is anticipated that there would be an increase in inflation of anywhere from 40–50% as a direct result of the skyrocketing costs of fuel, increased power tariffs, and rising gas prices. In addition, the value of the rupee will plummet. Currency traders predict that as soon as the value of the rupee is allowed to float freely, it will drop from its current artificial level of 230 to a range between 260 and 270. There is concern among some market watchers that the value of the rupee might go above 300 in the coming weeks. This will have the effect of causing significant inflation, which is already difficult.
The government of Pakistan will need to hike interest rates in order to bring inflation under control. This will result in an increase in the cost of conducting business to levels that are both unsustainable and unviable. But what’s much worse is that any increase in interest rates will completely demolish whatever is left of the government’s budgetary situation. Even at the present interest rate of 17%, there is a significant possibility that the cost of paying the debt will be greater than the total revenue collected by the federal government. This is a very serious possibility.
The hard reality that Pakistan cannot escape is that it will eventually default on its obligations. It is not a matter of if it will happen, but rather when it will happen. The only choice that makes any sense is to apply for a rescheduling of the loan. However, this is almost as terrible as a default because it is accompanied by such stringent riders that will make the existing IMF restrictions look like they are being relaxed. However, Pakistani lawmakers and the military leadership have been holding out hope that the storm will go on without affecting them.
It is very clear that the elites of Pakistan and the generals want the rest of the country to be willing to make sacrifices, but they are not willing to reduce their own spending or give up their advantages. They want to keep their royal protocol, their golf courses, and their vacations in Dubai. They also want to send their children to universities in the West and receive indefensible subsidies from the state’s dwindling coffers. However, they deny the average citizen of Pakistan even the most fundamental right to life.
Additionally, the Pakistan Army is not prepared to reduce its expenditures. It continues to purchase costly weapon systems despite the fact that Pakistan can no longer afford to do so. Worse still, it persists in its strategic excursions on both sides of the border, despite the fact that these endeavors have been shown to be unaffordable. The only way that the military budgets can be reduced is if there is an improvement in the strategic environment, there is a normalization of relations with India and Afghanistan without any legacy restrictions, and there is action taken against terror groups based in Pakistan.
However, according to the General Headquarters in Rawalpindi (GHQ), this isn’t going to happen because the military has no interest in making a paradigm shift in the way they approach India and Afghanistan strategically. In the past, the tweaks to the strategy did, in fact ,create space. No more. Since New Delhi is now aware of Pakistan’s deceitful tactics, it does not consider it necessary to respond in kind to Pakistan’s strategic maneuvers, which would only serve to benefit Pakistan. In any event, the Taliban are currently displaying their true colors, and it is becoming increasingly likely that the western borderlands of Pakistan will continue to be uneasy, which will both destabilize and radicalize the entire region.
The political class, much like the military, is more concerned with preserving its political capital and ensuring its political future than it is with preserving the country or its future. It is quite strange that political maneuvering is taking place at a time when the nation is on the verge of complete collapse. Imran Khan is pushing for snap elections, which he is confident he will win handily. The ruling coalition is desperate to put off elections for as long as they possibly can because they have no candidates or platform to take to the voters. The Army is concerned about upsetting the democratic process, but at the same time, it wants to continue to call the shots. It also does not want to see Imran Khan return to power, at least not right now, and it is prepared to block him in any way possible.
At this point, it appears like the government will go ahead and sign the dotted line in order to rejoin the IMF program. However, within the next month or so, it will begin flinging money around in an effort to gain back its political support. This indicates that by the time elections are held and a new administration is in power in Pakistan, the country will be in the throes of a much more severe crisis than the one it is currently facing. In other words, it doesn’t matter how you slice it, Pakistan’s economy, and along with it, the current state and political structure, are destined for a collapse. This is the case regardless of how you look at it.