Imran Khan and his 'Twitter War' with Trump
Barely three months after he assumed the position of Pakistan's premiership, Imran Khan is fighting on many fronts to shore up the economy and overcome its financial troubles. In October, he went to Saudi Arabia to attend an international conference in Riyadh and secured USD three billion in foreign currency support for a year and a further loan worth up to USD three billion in deferred payments for oil imports.
Incidentally, Imran Khan attended the conference which was boycotted by western governments and international companies concerned about the Saudi Crown Prince's role in the murder of Jamal Khashoggi in the Saudi consulate in Istanbul.
While the USD six billion from Saudi Arabia will help Pakistan avert an immediate balance of payments crisis and help it pay off over USD 2.5 billion in loan repayments due by November 2018, it is in the market for additional borrowings and other forms of assistance. Finance Minister Asad Umar told Bloomberg in August that he estimated Pakistan may need more than USD 12 billion and is casting its net widely in search of bailout money. Pakistan has already applied for an IMF loan package, but is resisting IMF demands for monetary and fiscal reforms. Umar put up a bold face and said that IMF "is one of many options given the help we have received from friendly states." Other potential sources of cash may be China, UAE, and Malaysia.
Meanwhile, an IMF review mission is currently in Islamabad and has been holding talks since early November with its leaders on Pakistan's request for a loan to "help address Pakistan's economic challenges," in the words of Christine Lagarde, the IMF chief. It is reported that the international lender had presented proposals to reduce the budget deficit, raise additional revenues, and further devalue the rupee which depreciated 26 percent since January.
IMF has suggested 1.0 percent increase in the rate of general sales tax (GST), taking it to 18 percent from the current 17 percent to raise an additional revenue of Rs 70 billion. They also proposed sharp increases in electricity and gas tariffs. Many of the suggested measures are unpopular in Pakistan, and Imran Khan has warned that "the government would not opt for an IMF programme if conditionalities are against the national interests".
Imran Khan is also engaged in a war of words with Pakistan's largest benefactor, US, and is following in the footsteps of President Trump by launching his "foreign policy via Twitter" tirade, according to Sandra Petersmann, a German correspondent at Deutsche Welle. He fired his first salvo against Trump the day after the US President told Fox NewsTV that "they don't do a damn thing for us" referring to Pakistan.
On November 19, 2018, Trump tweeted, "… we give Pakistan $1.3 billion a year. … We no longer pay Pakistan the $Billions because they would take our money and do nothing for us, Bin Laden being a prime example, Afghanistan being another. They were just one of many countries that take from the United States without giving anything in return."
Imran Khan did not wait long to fire back with his own tweets. "Instead of making Pakistan a scapegoat for their failures, the US should do a serious assessment of why, despite 140000 NATO troops plus 250,000 Afghan troops & reportedly $1 trillion spent on war in Afghanistan, the Taliban today are stronger than before," he tweeted.
"No Pakistani was involved in 9/11 but Pak decided to participate in US War on Terror," Khan followed up. "Pakistan suffered 75,000 casualties in this war & over $123 bn was lost to economy. US 'aid' was a minuscule $20 bn."
While Imran Khan may have a very good point, and win the battle on Twitter, the economic challenges for Pakistan keep on mounting. The IMF deal, if accepted, would put pressure on prices, say analysts, and may cause headaches for the government, already under attack from opposition parties. "They hold the government in Punjab with only one seat and the opposition knows fully well how to exploit angry public sentiments to unseat the government there," said analyst Asad Saeed.
Imran Khan is a realist, and has already informed the Federal Board of Revenue, Pakistan's main tax collection agency, to clean up its act, or the government would consider dissolving it. Pakistan's tax collection machinery, like many others in South Asia, is "notoriously corrupt (and) officials take bribes to keep people out of the tax net".
On its part, the USA has been working hard to lure Pakistan out of China's influence with a carrot and stick approach. On the one hand, it has warned IMF to be tough with Pakistan. "There's no rationale for IMF tax dollars—and associated with that, American dollars that are part of IMF funding—for those to go to bail out Chinese bondholders or China itself," Mike Pompeo, the US secretary of state, told CNBC in July.
Mike Pence, the US Vice President reiterated his recent criticisms of China's geopolitical strategies and attacked the country's "belt and road" initiative that Pakistan has participated in. At the recently concluded APEC conference in Port Moresby, Papua New Guinea (PNG), Pence urged Asian nations to avoid investment offers from China and to choose instead a "better option"—working with the United States—which, he said, would not saddle them with debt, according to the New York Times. "Let me say to all the nations across this wider region, and the world: Do not accept foreign debt that could compromise your sovereignty," Mr Pence said. To counter China, and as a carrot for other countries, US along with Japan, Australia and New Zealand announced a USD 1.7 billion infrastructure plan for PNG. The effort would bring electricity and the internet to much of PNG.
In the short term, things are looking OK for the new PM, and a IMF bailout package would help Pakistan to avoid defaulting on international payments. But the pressure on the government is mounting. The economic uncertainty last year cost Pakistan USD 41 billion, and it just lost USD 330 million in US military aid. The country registered its highest-ever current account deficit of USD 18 bn in the last fiscal year, which depleted its foreign exchange reserves, according to the London-based Financial Times.
Dr Abdullah Shibli is an economist and Senior Research Fellow at International Sustainable Development Institute (ISDI), a think-tank based in Boston, USA. His new memoir, Fairy Tales: Stories from my life will be published by Jonantik soon.