US arrogance

Published August 3, 2018

AN incoming government faced with a familiar economic crisis on the external-account and budget-deficit fronts will also have to contend with arguably new but predictable global politics.

An arrogant warning by US Secretary of State Mike Pompeo that an IMF bailout of Pakistan must not be used to help repay Chinese debts that Pakistan has incurred under CPEC has made clear that the incoming PTI government will have little time to adjust to the realities of power at the national and international levels.

Three points need to be made here. First, the US ought to reconsider the naked politicisation of assistance by the IMF and other Bretton Woods financial institutions. Pakistan and dozens of other countries have engaged with the IMF and the World Bank for purely economic reasons over the decades.

To now explicitly suggest that IMF and World Bank assistance for developing countries is linked to how those countries may engage with other regional and global powers that the US may have difficult relations with is preposterous.

Such tactics reek of bullying and could further undermine the so-called rules-based post-Second World War international order led by the US.

Second, Pakistanis need greater clarity and transparency on CPEC. The last PML-N government boasted of vast investments by China, but until the very end declined to share the true financial picture with the nation. That can no longer be countenanced, and the incoming PTI government should make public the necessary details of CPEC-related investments and fiscal responsibilities.

CPEC is a historic opportunity recognised by one and all for its potential to help Pakistan revamp its woeful infrastructure networks and improve economic productivity and export potential. Pakistan should engage boldly and creatively with China in all areas that are beneficial to this country.

Goodwill between China and Pakistan already exists and can be further increased to mutual benefit. But the last PML-N government often appeared to view CPEC through a domestic political lens and short-term fiscal breathing space.

China’s own phenomenal economic rise in recent decades ought to be the template followed by Pakistan when it comes to negotiating bilateral investments and financial arrangements. CPEC can go on to become an unprecedented national success, but first its terms must be shown to be transparent and fair.

Third, the incoming PTI government should consider the factors that appear to inevitably return Pakistan to the IMF embrace government after government.

At present, there may be an argument that problems on the current account side are inexorably pushing Pakistan’s towards a bailout scenario, but problems on the budget deficit side are also significant.

It has long been apparent that fundamental tax reforms and restructuring of the public sector are needed, along with increasing economic productivity and exports. If a few years from now another bailout is to be avoided, meaningful economic reforms must be enacted.

Published in Dawn, August 3rd, 2018

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