File photo. Rizwan Tabassum—AFP
Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan seems realistic and to-the-point when he assails the ruling coalition for bringing the country to the cusp of default—all the while ignoring the role his own government played in bringing the economy to this point—and accuses the media of turning a blind-eye to economic matters. He even appears logical in questioning why the federal government is more focused on his Toshakhana scandals rather than the economic conditions that have pushed the country to the brink of financial default. This view gibes with the general discussion held in Pakistan—including from some within the ruling coalition. Dependent on external borrowing for much of its existence, Pakistan should be case-hardened as far as default is concerned, often having to beg for its survival even as regional neighbors India and Bangladesh boast prosperity despite large populations. However, with the entire world on the brink of a recession, Pakistan risks failing on its repayments as never before.
The unfortunate reality is that Pakistan has never been free of the “default threat” and will remain exposed to a risk of bankruptcy due to a “continuously rising debt and the cost-of-servicing factor.” Beset by more than seven decades of repeated financial crises triggered by political disorder—often motivated by the ever-present fear of ‘emergency’—and military dictators with little knowledge of the economy, Pakistan cannot avoid external borrowing unless it changes the very foundation of how it functions. As posited by daily Business Recorder recently: “This ever-increasing expenditure exerts extreme pressure on the government as it is required to issue paper/security as collateral and hence, 80 percent of the liquidity is diverted to investments in instruments picking up borrowings … so-called modarbas total about Rs. 568.85 billion at present, while banks’ holdings of government Marketable Securities have reached Rs. 16.885 trillion.”
The ruling coalition, with an “experienced” finance minister of the Pakistan Muslim League (Nawaz), is used to avoiding default and says again that this time will be no different because “someone will come to our aid despite threatening signs emitting from the IMF.” Nonetheless, experts—including the PMLN’s own ex-finance minister Miftah Ismail—say that Pakistan’s shying away from “conditionalities” sought by the IMF will delay the release of the global lender’s next tranche and raise the risk of default. What prevents Pakistan from achieving the success of India and Bangladesh is the fact that its writ of the state does not run over half of its territory, with a penetrable border daily infiltrated by terrorists who fight with the Pakistan Army in its well-governed cities. The state has defaulted on many heads apart from its economy and there is little reason to believe it will emerge from this crisis anytime soon.