Over the past couple of years, the constant international discussion regarding Pakistan’s political and economic state has been steadily gaining traction. Every time Pakistan’s gloomy positions are brought up, sharp comparisons regarding the development of its neighbors (primarily India and Bangladesh) are also put into the spotlight. So, the question is, what has exactly gone wrong?
BOP Crisis
Pakistan has been faced with the crisis of a BOP deficit (Balance Of Payments) of nearly $30bn. For those who do not understand what the term ‘BOP deficit’ means, it simply implies that imports have exceeded exports, in this circumstance by $30bn. This is detrimental to a country because it often depreciates the currency of the country and places it in debt, along with many other reasons. Pakistan, however, did increase its exports and went from the 158th position to the 8th position in the world export growth ranking. However, the imports also rose by 14.1% compared to last year, widening the ever growing gap. This has led to Pakistan’s Foreign Exchange Reserve depleting the fastest in Asia – going from $13.5bn in February this year to $9.6bn last month. This has also led to Pakistan on the verge of becoming ineligible from collecting loans from the IBRD of the World Bank, since it fails to meet the requirement, in which a country must match a third of its import bill with its export bill.
Relationships with the US, China
Pakistan has been a US ally for some time now. The state was criticized by many for being too dependent on the US and not seeking economical independence. The US provided Pakistan with copious amounts of aid during the Cold War era to drive the Soviets out of Afghanistan in the 80’s. The military aid stopped after the Soviets were driven out in ’89, planting seeds of distrust within Pakistan in regards to US aid. Some assumed this was done to penalize Pakistan for its nuclear development program, others say that it just goes to prove that Pakistan was used by the US, much like a pawn. Aid was given to Pakistan after the 9/11 attacks by the US, in exchange for the help of Pakistan to topple the Taliban in Afghanistan. Pakistan received the aid, but reportedly also helped the Taliban. As a result the Obama administration suspended $800mn in aid in 2011, and $350mn in military aid in 2016. The Trump administration has frozen all aid given to Pakistan in January.
After the US cut, Pakistan has involved itself in the CPEC (China-Pakistan-Economic-Corridor) project, under the OBOR (One Belt One Road) initiative. Pakistan believes that this will help its economy and infrastructure. China has planned to invest $62bn in the next 15 years in this initiative. The project will involve Pakistan leasing out thousands of acres of land to Chinese enterprises, a thorough system of surveillance from Peshawar to Karachi on roads and busy marketplaces, and make Pakistan a market for agricultural goods from Pakistan. It will also build on the market presence already established by Chinese brands. With Pakistan as an ally, China will have easy access to Africa and Europe through its maritime routes.
Pakistan’s initiatives with China is a result of its fracture in relations with the US. CPEC will help Pakistan economically, but will also increase Chinese influence heavily in almost all sectors of Pakistan. China also gave Pakistan a loan of around $1bn in June, with the total loans given by China to Pakistan breaching $5bn. It seems that Pakistan has not attained economic independence, it has rather shifted from one donor country, to another.
Military Rule, and State-Sponsored terrorism
Pakistan’s government has a very strong influence of its military. It is common knowledge that Pakistan itself is very anti-India, and pro-Muslim and its policies reflect that. Pakistan has been stockpiling nuclear weapons for a long time now, prompting experts to claim that it has become one of the most dangerous countries in the world. During the Cold War, Pakistan established strong ties to the Taliban in Afghanistan. Despite assisting the US in trying to topple the Taliban regime, Pakistan has also been helping the Taliban themselves. Distributing weapons, intelligence and giving safe havens to the Haqqani network has only stirred up Afghanistan’s already troubled state. Pakistan supports the Taliban so that no anti-Pakistan group can take power. Pakistan is also afraid of the existence of an Afghan government that is also pro-India. Pakistan believes that the Taliban in Afghanistan will not weaken and the Taliban may even obtain some sort of formal political power, and Pakistan wants to remain an ally once that happens.
The Pakistan army has also seem to be in support of extremist institutions like the LeT (Lashkar-e-Taiba). Although Pakistan condemned and banned the group in 2002 due to American pressure, it revealed that the army had ties to with LeT and army officials called the group ‘excellent institutions of Pakistan’.
The fact that Osama Bin Laden was found and assassinated by the CIA in Pakistan is also a huge blow to the country’s reliability on combating terrorism. Due to this, the West, which was supporting Pakistan on multiple issues like Kashmir started to alienate themselves from the country.
Other domestic issues
Pakistan’s literacy rate is 57%, and there is a disparity of around 13% between the literacy rate of its adult male and female population. However, the military spending of Pakistan is as boisterous as any other; with its constant armaments of nuclear weapons. Pakistan has been criticized for failing to provide a uniform system of education. Private schools only cater to the needs of the financially affluent, whereas public schools are reserved for students with more humble origins. In direct contrast is the madrasa system, which happens to be in expensive when compared to its counterparts. Increase in the number of madrasa students reflects upon the State’s inability to properly provide affordable education to the public.
Overpopulation has become a recurring issue in almost every country in the world and Pakistan is no exception. Lack of education, and lower incomes often lead to overpopulation. It is a vicious cycle, but is not one that is unbreakable.
There is no analysis on the needs the nation may have in the future, leading to a lack of qualified workforce and capital goods in the future.
Is all hope lost?
Pakistan is indeed in a dire state. Its economic state and domestic political affairs do warrant concerns. However, Pakistan will remain an important country for the foreseeable future. The CPEC has drawbacks which mainly involve increased Chinese influence, but it will certainly help Pakistan in a number of ways. In the long run, Pakistan should focus on becoming self-independent once it has a stable economy. Pakistan also has untapped potential in its agricultural sector and workforce. If it focuses on education and training and promotes the equality of women, it would have a more qualified and productive workforce in the future. The ways Pakistan could redeem itself economically are plenty in quantity, but what the country truly needs is incentive; a government that prioritizes the wellbeing of its people and sets aside needless, identity-based political anonymity. The people of Pakistan are not strangers to times of crisis, but they have overcome them with a strong resolve and will hopefully continue to do so.
Muttaqi Mashrur Ahnaf
Editor, Economics
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