NationalVolume 14 Issue # 06

Economic crisis and the war on corruption

The new Pakistan government, led by Prime Minister Imran Khan’s political party, Pakistan Tehreek-e-Insaf (PTI), also including certain smaller groups, seems to be faced with an extraordinary economic crisis putting extreme financial burden on the general public resulting on the one hand in loss of support to the government and on the other hand has emboldened the opposition parties to direct its criticism against the government. In the entire situation important questions have emerged regarding the ability of the PTI government to handle the economic morass and the future of democracy in Pakistan.

The economic crisis in the country is indubitably due to the mismanagement of the economy by the previous government of the Pakistan Muslim League-Nawaz (PML-N), which during its five-years rule accumulated an unprecedented amount of loans resulting in hitherto unmatched foreign and domestic debts. Although contracting loans by any government is not necessarily wrong or bad but it is the purpose and use of these loans which determine the acceptability or otherwise, of the borrowing. Insofar as the loans contracted by the PML-N governments are concerned most of the borrowed money were spent on mega infrastructure projects, including such ventures as metro lanes, motorways, The borrowed money was hardly used for improving overall governance structures and social services delivery in the country. More importantly, the PML-N government did not use the colossal amount of loans to address the fundamentals of macroeconomic instability in the country. Therefore, the country could not be put on the path of sustainable development and the economy on the path of increasing growth and productivity. On the other hand, whopping financial corruption and misappropriation in the award of contracts of mega projects by the PML-N government also shattered the foundations of Pakistan’s economy. These are not mere allegations. One may recall that the PML-N finance minister and “wizard” Ishaq Dar, had to flee the country during his own government’s tenure to escape arrest after concrete proof of his financial corruption was obtained by the country’s accountability bodies. This act of Mr. Dar made Pakistan a laughing stock in the world because a sitting minister escaped the country when his party was in total control. It is also important to note that today the country’s intelligence and investigative agencies as well as the State Bank of Pakistan claim that yearly the mindboggling sum of $10 billion is laundered out of Pakistan while the governments have had failed to check this process.

So the PTI government, which took the reins of government on August 18, finds itself in dire financial straits. The deficit in the current account and balance of payments is so huge that PM Imran Khan has stated that running the government was next to impossible in such a situation. Such words from a leader like Imran Khan, who has been resolute and persevering in his conviction of putting the country on the track of development, are very depressing. Resultantly, the government has resorted to extremely unpopular steps of raising the prices of utilities, particularly natural gas and electricity. More importantly, PM Khan and other leaders of the PTI, some of whom have become federal ministers, have to eat their words by admitting that the government had no other option but to go to the International Monetary Fund (IMF) for a financial bailout of around $10 billion. PM Khan although said that his government was trying to avoid getting bailout package from the IMF. However, it seems that, ultimately, the government has to contract a financial arrangement with the IMF. Here it is important to elaborate that going to the IMF to get financial assistance by any government facing a financial crisis is not all that bad. The raison d’être of the IMF, after the World War II, was to provide financial assistance to any country facing economic and financial crises. PM Khan and his cabinet members need not be apologetic about going to the IMF.

Here it is important to note that the IMF has asked the Pakistani government to provide it details for what purpose it needs financial assistance. At the same time the IMF officials stated that Pakistan accumulated such huge foreign debts in the last five years because of Chinese loans. There is some substance in this assessment regarding the state of the Pakistani economy because the terms of the financial investment by China in Pakistan, which the PML-N government signed are not transparent enough. It is also somewhat surprising that although the Chinese investment of around $70 billion under the umbrella of the China-Pakistan Economic Corridor (CPEC) also include such projects like the Lahore Orange Line Metro Train (OLMT), which is not a project to promote economic stability or even has anything to do with CPEC. It is also worth noting that China, which otherwise is investing huge sums in Pakistan, has so far not offered anything more than between $5 to $8 billion to Pakistan to address its financial woes and improve its foreign exchange reserves. US President Donald Trump has already conveyed that US taxpayers’ money would not be lent to Pakistan to pay back to China. The US has the biggest voting stakes in the IMF on the basis of financial contribution, which it provides to the global fund.

The government of PM Khan is, indeed, in dire financial straits but the real sufferers are the masses. Therefore the media in Pakistan in the wider interest of the country and its people must not put pressure on the government for going to the IMF and analyzing its performance on a day-to-day basis. There is no doubt that PM Khan and his government are honest and want to put the economy on track. However, at the same time there is no denying the fact that both PM Khan and his PTI are quite inexperienced in running the affairs of the state. The PTI government has also started an extensive campaign against perpetrators of financial corruption in the country, including politicians, business tycoons and bureaucrats. Thus, faced with economic crisis on the one hand and launching of campaign against corruption on the other hand, where it is also facing tough resistance from the opposition politicians, bureaucracy and business tycoons, the government seems to be floundering. It remains to be seen whether the government would be able to successfully negotiate the situation or not. In case PM Khan remains resolute, then he could implement a policy which would be beneficial for the state and society. However, if the PTI government under PM Khan fails to address the economic and financial woes of the country, it would be extremely disastrous for the country and future of democracy.