Courtesy National Assembly of Pakistan
Finance Minister Ishaq Dar has blamed “geopolitics” for the failure to revive a stalled International Monetary Fund (IMF) program, alleging “global forces” want to deal with a “defaulted” Pakistan rather than a stable one. Despite this, he maintained, “the country would meet its obligations with or without the Fund’s bailout package,” adding that the country would not default. It is difficult to buy into Dar’s claims, as Pakistan’s economic indicators have only worsened in his tenure as finance minister and anticipated support from “friendly nations” China, Saudi Arabia and the U.A.E. have yet to materialize.
In a recent report, brokerage Arif Habib Limited has noted the steep rise in Pakistan’s default risk due to the stalled IMF program, with the Moody’s investors’ service warning the country could default on its debt obligations after June 2023 without the global lender. To the layman, the situation is dismal: Pakistan’s foreign exchange reserves are pitifully low at $4.3 billion, with estimates suggesting the country will need $27 billion for debt repayments in the upcoming fiscal year. Based on the proposed budget, the country is facing a shortfall of $5 billion, with debt servicing requirements from 2024-27 hitting a significant $73 billion. It is difficult to imagine that Dar, with multiple outbursts before media, will be able to steer the country out of this crisis.
The global scenario is also no longer conducive to supporting Pakistan, with the country’s traditional allies shying from providing financial support without the IMF. Could this be a result of the U.S. “punishing” Pakistan through the IMF because of Islamabad’s tilt toward China, which has pushed Washington back in the Gulf by negotiating peace between Arab states and Iran? America has also repeatedly made clear its opposition to the China-Pakistan Economic Corridor, seen as a path to economic prosperity for not only China and Pakistan, but also Iran, Afghanistan, and the Central Asian Republics. The ‘superpower’ status of the U.S. is undoubtedly threatened, but to blame it for all that ails Pakistan—where Dar continues to resist much-needed economic reforms—is shortsighted, and shows a faulty assessment of how the world will work with the U.S. in the days to come.