Islamabad was on the verge of defaulting on its repayments of debts and servicing charges let alone being able to pay for the basics for its people.
In recent times, Pakistan has gone through an unenviable predicament of natural and man or politician made disasters. It has gone through a regime change or a transfer of power depending on the way one looks at it . The army being the real arbiter cast the dice against a yelling Imran Khan and his coterie as they felt being challenged by a political minion of their own creation.
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But people of Pakistan suffered the worst floods affecting 33 million people and damages accruing to nearly $40 billion disrupting the supply chains in the country. Mismanagement of the economy by successive governments has been a given. But the pandemic and the Russia-Ukraine war and energy crisis added to their woes even more .
Despite that there was no let up in Islamabad or Rawalpindi ‘s loyalty to the homegrown terrorists targeting India as part and instruments of their foreign policy with the connivance of their ‘Ironclad friend’ in China. Zero sum policy dictates disproportionate use of vital resources towards conflict creation and its sustainability in the long run and the people and their basic needs suffer. Islamabad is no exception since it is blinded by its strategic rivalry with India.
Islamabad was on the verge of defaulting on its repayments of debts and servicing charges let alone being able to pay for the basics for its people. In a way the unfortunate natural disaster in the form of floods caused by global climate change provided a platform to seek international assistance for rebuilding and humanitarian relief supplies.
However, the IMF conditionalities are typically not easy to meet as restructuring would be warranted as well as some guarantees from the debtors will be required. But, with Antonio Guterres, the UN Secretary General who castigated the IMF, the Pakistani government was able to invoke the courtesies and the largesse of some donors at the Geneva Conference on January 9 since it was beyond Pakistan’s capacity to deal with floods and consequent damages.
Pursuant to consultations with World bank, Asian Development Bank, UNDP and the EU, Islamabad presented a 10 year framework based on Resilience, Recovery, Reconstruction, and Rehabilitation (4RFs) and the Post Disaster Needs Assessment proposals with international partners. Pakistan was able to secure $10.57 billion from donors and creditors including that of Islamic development bank group pledging $4.2 billion over three years.
Others included Saudi Arabia ($1 bn); World bank ($2 bn) and EU pledged $93 million, Germany $88 million, China $100 million, Japan $77 million, ADB $1.5 billion, USAID $100 million and France committing $345 million. Qatar that often expresses solidarity with Pakistan also extended $25 million in support.
Reportedly Pakistan sent 4500 soldiers to Doha for the FIFA world cup security. It will take time for funds to percolate to the project levels as transparency mechanisms are worked out given the public perception and lack of faith and severely divided polity. Immediate financial requirements to avoid default had to be made on priority .
Pakistan turned back to its traditional though cautious benefactors comprising Saudi Arabia, UAE and Qatar for an immediate bail out and deferment of due payments and continuation of credit lines. Prime Minister Shehbaz Sharif went on his third visit to the Emirates since assuming office beseeching greater indulgence and assistance.
During the official visit (June 12-13), Sharif called on UAE President Sheikh Mohamed bin Zayed signing three MoUs and the two sides in a joint statement reiterated their strong ties while Sharif reiterated his gratitude for creating an air bridge of assistance for the flood hit Pakistan. He also sought for deferment of repayment of $2 billion due soon and fresh investment of $2 billion in energy, aviation, digital domain and infrastructure. However, while the Sheikh agreed to the roll over facility of $2 billion, he also approved $1 billion loan to help the cash starved nation.
New Pakistani Army chief General Syed Asim Munir also visited the Kingdom of Saudi Arabia and UAE to renew his relationships and seek the assistance as well as to assess the regional situation and potential collaboration. However, Riyadh has been kinder and apparently after the visit of Chinese president Xi Jinping’s visit wherein discussions were held on various projects including that on the $10 billion Gwadar refinery project that the Saudis had committed.
Although Saudi Arabia had announced several investments in August last year, crown prince Mohammed bin Salman ordered that Kingdom’s investments in Pakistan be raised to $10 billion. He also instructed that the Saudi Fund for Development be increased as Saudi deposit in the State Bank of Pakistan to reach $5 billion to give immediate relief as Pakistan’s foreign exchange reserves dipped to abysmal $5.8 billion which could not even cover one month of imports. That’s why Pakistan having come out of the clutches of FATF for terror financing investigations is now hoping for greater IMF bailout packages even as the local polity remains fragile.
Despite all these injections and assurances by the Riyadh and Abu Dhabi the fact remains that China alone accounts for over $30 billion in Pakistani debt and according to its central bank, Islamabad has to pay nearly $20 billion in the next 12 months, and its GDP growth being slashed to 2 percent which is indeed a precarious situation. Moreover, with the TTP (Tehreek-e-Taliban Pakistan) mounting violent attacks on Pakistani and Chinese assets and increasing association with designated terror groups, Islamabad ‘s credibility and ordinary Pakistanis’ plight are unlikely to be redressed.
— The author, Anil Trigunayat,
is a former Indian Ambassador to Jordan, Libya and Malta, and currently heads the West Asia Experts Group at Vivekananda International Foundation. Views expressed are personal.
Read his previous articles here
(Edited by : C H Unnikrishnan)
First Published: Jan 21, 2023 10:39 AM IST