IT appears that we are approaching a season where no one is entirely satisfied. This is not an estimation of the inner turmoil within Pakistan — which nevertheless fits the bill — but an evaluation of the world at large. When our television screens attempt a diversion from the tumult at home, they switch to even more pressing depictions of the doom that is and the doom to come.
For the moment, its visible parameters involve the conflict in Ukraine, where a Russian general mastermind who devastated Syria has now taken charge of Ukraine. In a macabre announcement of his leadership, he ordered the bombing of a train station and killed 50 civilians. Now that the war has gone on for over a month, its reverberations are becoming evident.
In Sri Lanka, the inflation and food crisis had been brewing long before the Russian invasion of Ukraine, and had boiled over onto the streets. The cabinet members have tendered their resignations, seeing themselves as unable to assuage the hunger of the people. As news reports have shown, the people on the streets are not simply political workers. Most, in fact, have no real political affiliation; they are, instead, ordinary people who work in offices and shops and are simply unable to feed their families.
In response, Sri Lanka has sought assistance from international agencies to stave off a debt crisis. Ali Sabry, recently appointed as finance minister, has said that $3 billion will be required to prevent a debt crisis. That’s not all; the country is also seeking to freeze its payments to the IMF and restructure another debt, $1bn of which is due in the next few months.
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Over in the Middle East, Egypt is also suffering. Russia and Ukraine not only supplied 85 per cent of the wheat consumed in the country, they were also sources of tourism income, which is crucial to the Egyptian economy. Now Egypt too is asking for help from the IMF. Last week, the Egyptian currency lost 14pc of its value, stabilising only in the hope that a deal would be reached with the IMF. Even if that deal is reached, it is almost certain that there will be a food crisis in the country. While alternative suppliers for imported wheat can be found, the tourists that filled the resorts of Sharm al-Sheikh and Luxor are not coming back anytime soon. When there is war abroad, famine and starvation at home, leisure and fun are often the first things to go.
This is the third time Egypt has turned to the IMF in recent years; the latest was the funding of a $12bn loan. These loans are propping up the economy, which will almost certainly collapse without them.
The months ahead will see the resources of the world’s financial institutions being stretched to the limit.
The crucial point in understanding what is happening in Sri Lanka, in Egypt and, of course, in Ukraine, is that in the summer months we will see the resources of the world’s financial institutions being stretched to the limit. Loans and support that could have been serviced easily are going to be much harder to get. Things that were a matter of course and were counted upon may not happen, and this will lead to dire consequences for countries and people who have already been pushed towards the hellish realities following two years of the Covid-19 pandemic and its associated effects.
With this as the backdrop for the hot summer season, one wonders why anyone would wish to be at the helm of Pakistani politics. Almost a month ago, Shaukat Tarin, who was then the finance minister, was questioned by the IMF about Pakistan’s ability to fund the $1.5bn subsidy package. The last government passed off the inquiry as a matter of course, but the fact is that whatever administration tries to ease the pressure on the people with money borrowed from abroad will likely face similar questions.
In addition to this inquiry, the IMF has also begun its review of the $6n that was part of a ‘rescue package’ that Pakistan received in 2019. The last government had signalled that the money that financed the rescue package would eventually be repaid. Those, however, were the promises of the last administration. As the new administration takes office, they will undoubtedly blame the last one for this mess.
However, the terrible thing about these messes is that the world does not care whether it was the last administration or the current one that created them. Their area of concern is how these debt shortfalls will be handled and if Pakistan is a country to whom further money can be lent. This crucial question has always been a problem for Pakistan, which has relied on foreign guarantors to help get money from international institutions. The future is likely to be no different at all.
The competition, however, is likely to be tough. International institutions facing requests from a number of countries, including war-torn Ukraine, famine-torn Egypt and strife-torn Sri Lanka, to name a few, will have to make difficult decisions. These decisions may shut out Pakistan, creating an awful situation where the people are thrust into ever-worsening conditions that may reach the level of desperation seen in other countries.
The new government should present a strategy as to how it plans to avert the burgeoning debt crisis. The inflated prices of petrol, rice and sugar are already crushing Pakistan’s poor and tightening conditions for the ever-beleaguered middle class. Beyond the sloganeering and the promises, some specifics concerning the future would be welcomed by the people who have so far only been watching procedural dramas being played out in Islamabad. Slogans, after all, can provide moments of victory and uplift that last a few days, but hunger roils in an unrelenting cry of need and want.
The writer is an attorney teaching constitutional law and political philosophy.
Published in Dawn, April 13th, 2022