Pakistan is going through an extraordinary period of crisis as its administrators jostle to rescue its debt-ridden economy amidst rising political uncertainties and surging terrorist threats. While its people wrestle with hunger and increasing unemployment, opaque loans from its closest ally, China, are complicating bailout negotiations with the International Monetary Fund (IMF).
“Pakistan is facing one of its worst economic crises at a time of political instability and problematic security,” Aparna Pande, a research fellow at the Washington, D.C.-based Hudson Institute and author of two books on Pakistan, told The Epoch Times.
Pande said the ongoing and continually prolonged negotiations with the IMF are a symptom of the crisis. "This is Pakistan’s 23rd bailout from the IMF. The IMF is a lender of last resort—like the ICU—and if you go to the ICU 23 times there are underlying issues that need resolution,” she said.
In 2022, the Pakistani economy grew by only two percent, while its foreign reserves held by its central bank currently stand at $3.1 billion: not enough to cover one month of exports.
“Pakistan is on the verge of economic default and at the same time facing one of the worst surges in Islamist terrorism. Young professionals are leaving the country in record numbers. Those who are staying behind are pessimistic about the future of Pakistan. It’s a terrible time for 220 million Pakistanis,” Adnan Aamir, a journalist working in Pakistan, told The Epoch Times in an email.
Aamir, in a recent story for Nikkei Asia, wrote that the overall crisis has accelerated “brain drain” from the country. The latest government figures show that 832,339 Pakistanis went overseas to work in 2022, the third-highest number ever.
Years of Bad Policies
Critics blame Pakistan’s policymakers for the country’s economic ordeal and blame certain prominent politicians for fanning the crisis for the sake of votes.Ahmed Quraishi, a veteran Pakistani journalist, feels that the current situation reflects years of bad economic policies. He thinks the country’s leaders failed to build on its strengths and instead adopted a model of “perpetually” living off international loans.
Quraishi attributes the current stalemate with the IMF to the regime of former Pakistani prime minister Imran Khan, whose government lost to a parliamentary no-confidence vote in April of last year.
‘The latest troubles with international financial institutions stem from former Prime Minister Imran Khan’s ill-advised move to renege on his IMF austerity commitments, thereby damaging Pakistan’s future negotiation position,” said Quraishi.
Aamir said reforms have been almost non-existent in Pakistan’s “inherently flawed” economy. Global allies no longer trust the country for new loans because they did not see any reforms or economic improvement after previous loans.
Fanning the Crisis
Adding to the economic woes is increased political instability, which critics allege Khan is using for his political gains. Khan’s party was ruling in two provinces—Punjab and Khyber Pakhtunkhwa—and the elected assemblies of both those provinces were dissolved in January.The dissolution was thought to be pushed by Khan, who has been demanding early elections in the country since he was ousted from power last year.
“Imran Khan used the dissolution of assemblies as a political card to force early elections in the country,” said Aamir.
“Pakistan will go bankrupt if the [current] government fails to hold early elections,” said Khan, blaming the current economic crisis on his removal from power. “Only that will ensure political stability.”
Quraishi said Khan is power-hungry and his protests are known to be campaigns to placate Pakistan’s voters.
Chinese Loans Raise Concerns
Pakistani sources haven’t ascribed the current crisis to China—Pakistan’s largest creditor. However, critics say drawn-out negotiations with the IMF are due to China’s less-than-transparent loan dealings.Pande said the IMF and other financial institutions want to know the details of Chinese loans to Pakistan before they offer any more bailout loans.
On Feb. 16, American foreign policy adviser Derek Chollet, who led a delegation visit to Pakistan last week, shared concerns about the country’s Chinese debt.
Kickbacks and Corrupt Dealings
Pande said that China’s reluctance to share detailed information about its loans to Pakistan likely means that these loans include “kickbacks to local elite, corrupt dealings, and certain conditions it would not want the world to know about.”Aamir said that although the Pakistani government has a favorable opinion of China, the government has come to realize the country has fallen prey to China’s debt trap.
Betting on Pakistan’s Army
Madhav Nalapat, director of geopolitics at India’s Manipal University, told The Epoch Times that China has fostered its relationship with Pakistan’s powerful military because it believes the army controls the country.“The Chinese have made a very big bet on Pakistan’s army. China has been supporting not the people of Pakistan or the state of Pakistan. They have been fully backing the Pakistan military,” said Nalapat, adding that in the current situation of increased threats, in order to protect China’s investments at CPEC, more and more of its security apparatus is being established inside Pakistan.
“In my view finally, if they want to protect their investment, there is something they will have more and more—more Chinese soldiers and security people. And paramilitary is coming in civilian clothes—more and more,” he said.
The Epoch Times couldn’t independently verify Nalapat’s claims about the presence of the Chinese military in civilian clothes inside Pakistan.
Aamir, said, however, “The Chinese asked for permission to bring their security, which [the] Pakistani government denied.”
Rising Terrorism
The Taliban’s return to power in Afghanistan in 2021 had an adverse impact on Pakistan’s national security. The anti-Pakistan insurgent group Tehreek-e-Taliban Pakistan (TTP), also known as the Pakistani Taliban, has launched fresh attacks during the financial crisis.China Should Take Responsibility
Nalapat suggests that China should come forward to help Pakistan resolve its crisis. China, he said, is responsible for boosting the Pakistani army, the lapse in Pakistan’s relations with the United States, and the complete stalemate with India.“China should write off the entire debt Pakistan owes it and give it $100 billion for civilian use only. There should be UN monitoring to make sure it’s only [used for] civilian purposes,” said Nalapat.