US elections: What’s at stake for Pakistan’s economy?

Published November 2, 2020
A combination picture shows US President Donald Trump and Democratic presidential nominee Joe Biden speaking during the first 2020 presidential campaign debate, held on the campus of the Cleveland Clinic at Case Western Reserve University in Cleveland, Ohio, on Sept 29. — Reuters
A combination picture shows US President Donald Trump and Democratic presidential nominee Joe Biden speaking during the first 2020 presidential campaign debate, held on the campus of the Cleveland Clinic at Case Western Reserve University in Cleveland, Ohio, on Sept 29. — Reuters

The US voter can turn the tables and push the Trumpili world to the basket of history this week.

Like most other nations that are upset with the United States for acting unilaterally over the past four years, Pakistanis want the future leader of the powerful nation to be more compassionate in the current trying times of the pandemic-induced global recession.

Under President Trump, the United States scrapped the Iran nuclear deal, abandoned the Trans-Pacific Partnership, walked out of the Paris agreement, pulled out of the Human Rights Council and the UN Education and Scientific and Cultural Organisation. He chopped the funding for the World Trade Organisation, threatened to pull out of the North Atlantic Treaty Organisation (Nato) and started the process to withdraw from the Intermediate-Range Nuclear Forces Treaty. He initiated a tariff war with China and administered visa restrictions and cancellations for overseas professionals working there. President Trump’s rigid attitude irked even close US allies. It was hard for Pakistan to put up with the tougher stance of the United States and multilateral institutions in its influence. The drift of the sole superpower towards India when China was investing liberally in Pakistan under the China-Pakistan Economic Corridor (CPEC) tested Pakistan’s skills of diplomacy.

Geopolitics apart, Pakistan desperately needs the resumption of the International Monetary Fund (IMF) loan programme — which was suspended in February — on palatable terms, easing of the Western pressure to scale down the CPEC, clearance by the Financial Action Task Force (FATF), progress on a bilateral investment treaty (BIT) conceived decades back and access to cheap Iranian oil and gas to put the economy back on the rails. It is hard to imagine a more accommodating attitude towards Pakistan if the current US administration secures another term.

‘Republicans were assumed to be friendlier to Pakistan, but now the deep chasm between the United States and China dictates Washington’s South Asia policy’

The harsh stabilisation policies mandated by the IMF’s Extended Fund Facility (EFF) signed in early 2019 already weakened growth drivers with people bearing the crippling burden of adjustments. The management of the grave health crisis entailed a huge economic cost that was partially compensated by dollar inflows from friendly countries and institutions.

For the first time in recent history, Pakistan’s GDP recorded a contraction of 0.4 per cent in 2019-20 (the IMF estimated it to be -1.5pc in real terms). This was despite $3.7 billion received collectively in loans and grants to support the pandemic management efforts. The debts were rescheduled, Saudi Arabia deferred oil payments for three months, China permitted the use of $1bn deposited in the SBP and the IMF disbursed $1.3bn under its Rapid Financing Instrument. The World Bank gave a grant of $500 million, Asian Development Bank (ADB) $350m, Islamic Development Bank $70m, Organisation of the Petroleum Exporting Countries Fund (Opec) $50m and France’s AFG $51m to protect lives and livelihoods and contain the spread of the deadly virus.

The background conversation in diplomatic circles revealed a departure and greater goodwill for the Democratic duo vis-a-vis the Republican Trump team. In Islamabad, Republicans are generally assumed to be warmer towards Pakistan.

Read: Why pinning hopes on US election is wrong

The local intelligentsia did not have a firm preference, but has mostly been in favour of the Democrats. This time around though, it’s hard to find a supporter of President Trump in Islamabad. There was support for the Democratic presidential candidate Joe Biden in most unexpected quarters.

Donald Trump is perceived to be a nationalist by commoners in Pakistan, but his rival Joe Biden is little known to the masses. The mild-mannered Democratic candidate lacks the force of charisma like President Barack Hussein Obama who captured the public attention from a faraway land. Hussein is a Muslim middle name and his affinity with college friends of Pakistani origin probably played a role in his public perception here.

The elite who send their children to study in the United States and the relatives of Pakistani-Americans back home detest President Trump for what they call “his racial and anti-immigrant bias”.

Some executives, who lost US-funded projects as the country scaled back its funding, fondly mentioned Kamala Harris, the Democratic vice presidential candidate.

“The US elections are less of an event back here. People of Pakistan are busy surviving, politicians are consumed in confrontation, business community is occupied adjusting to the Covid-19–infected business world to care about the US elections and their outcome,” commented an analyst.

Amin Hashwani, a business leader, does not see the situation easing for Pakistan irrespective of the US election results. “I don’t foresee any tangible change for Pakistan post-November. Traditionally, Republicans were assumed to be friendlier, but currently the deep chasm between the United States and China dictates Washington’s South Asia policy. The United States seems bent upon arming India with defence technology and equipment to counterbalance and contain China’s ascent. Prime Minister Imran Khan has succeeded in striking a balance in the country’s diplomatic relations with both which, in my view, is not a mean achievement.”

The foreign secretary and officers of the US desk in the Ministry of Foreign Affairs were understandably reluctant to comment on the internal matters of the United States.

Despite the burden of history, the United States is the closest trade ally with the bilateral annual trade volume of over $6.5bn and the top destination for Pakistan’s exports. Top five products imported from the United States are cotton, scrap iron, steel, soya bean, LNG, defence-related equipment. Export items include bed, bath and kitchen linens, ladies’ garments, men’s wear and woollen sweaters. Pakistan enjoys a favourable trade balance with a gap of over a billion dollars.

The US investment in the country is second only to China. There are over three dozen top US companies active in the Pakistani market, including familiar brands like P&G, Pepsi, Coke, Facebook, Google, Uber, ExxonMobil, TRG, Citi, Bayer and Abbott. The operator of a major trade company told Dawn that Pakistan entered the US chemical market this year as tariffs were revised up for some other nations in the wake of the pandemic.

Published in Dawn, The Business and Finance Weekly, November 2nd, 2020

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