Tag Archive for: Imran Khan

Covid-19 is the ultimate test of Imran Khan’s leadership of Pakistan

During this pandemic, much of the world’s attention has been focused on China and on how Covid-19 outbreaks are being handled in various countries, notably Italy, Spain, the United Kingdom, the United States, Singapore, South Korea and Iran. However, little attention has been given to South Asia, and in particular Pakistan. The number of confirmed cases there remains low but, if it’s not managed properly, the pandemic could devastate a country that’s already under severe stress on many fronts.

According to the latest figures, Pakistan has recorded almost 10,000 cases and over 200 Covid-19-related deaths. Those numbers seem small for the world’s fifth most populous country, with 220 million people, and probably reflect Pakistan’s limited testing capacity. Only around 111,000 people have been tested so far. There’s also anecdotal evidence that the poor, in particular, won’t admit that they may have the virus. And, even if these figures were accepted at face value, the number of known cases continues to grow. There’s no sign of the curve flattening in Pakistan.

Prime Minister Imran Khan initially downplayed the potential devastation, rejecting calls from provincial governments and medical experts for a nationwide lockdown. He argued that a lockdown would wreck the economy and instead urged people to practise social distancing. Under pressure to avoid a disaster down the road, the military stepped in and, working with provincial governments, enforced a partial lockdown on 22 March. The agricultural sector remained open.

The national government has since published a report warning that the number of cases could soon rise to 50,000. A combination of factors could enable the virus to spread quickly throughout the country.

Much of Pakistan’s socioeconomic infrastructure is decrepit. The health system is poor and under-resourced at the best of times. It has almost no capacity to deal with a surge in Covid-19 cases. Karachi, a city of more than 20 million people, has only 600 hundred beds in intensive care units, and there are only about 2,000 ventilators for the whole country. The shortage of resources is so dire that doctors and medical staff protested in Quetta, the capital of Balochistan province, over the lack of personal protective equipment. A number of them were beaten up and arrested by riot police.

Compounding the medical side of the equation is the appalling socioeconomic state millions of Pakistanis live in, particularly those in urban areas. Two-thirds of the inhabitants of Karachi live in slums with no proper sanitation, running water or electricity, amid open sewers filled with garbage, and often with 10 people sharing a room. For the overwhelming majority, using public transport means being cramped in small spaces. For millions, regular handwashing is a pipe dream and social distancing an impossibility. The situation isn’t any better in rural areas where two-thirds of Pakistan’s population lives and where there’s often no access to hospitals or any medical facilities at all.

Complicating an already difficult socioeconomic environment is the unwillingness of many mullahs to obey government orders to prevent worshippers from crowding mosques at Friday prayers. They’ve argued, instead, that the pandemic requires even larger numbers to pray to God for protection.

The religious leaders’ refusal to abide by the government’s directives took an extreme turn with a massive religious gathering on the outskirts of Lahore, Pakistan’s second largest city, last month. This event brought together 100,000 to 150,000 people, including foreigners from scores of countries. And, although it was eventually cut short, participants had already spent time together, eating and sleeping in tight spaces. Authorities have quarantined 20,000 of the participants but are still looking for thousands more. Many have left the country.

Despite the virus thriving in mass gatherings, the government has agreed to allow congregational prayers during the month-long period of Ramadan starting tomorrow. And although there will be social distancing restrictions in principle, such large crowds can only accelerate the spreading of the virus.

Many have come back from the Middle East without being tested or quarantined. Hundreds returned from Iran, which has the seventh largest number of confirmed Covid-19-related deaths, before the border was closed.

These factors make for a potentially dire situation for a country whose economy was already in poor shape. Experts expect exports to drop by 50% in the next two months. It’s too soon to know how Pakistan will weather this crisis. But the country depends heavily on the remittances of thousands of workers in the Middle East and the global lockdown is going to hurt it badly.

There is some good news; the Paris-based Financial Action Task Force, a global watchdog that aims to stop the financing of terrorist activity and money laundering, has postponed until October the deadline for Pakistan to meet its obligations to avoid being put on a blacklist. Being on the list makes it very difficult to obtain international financing and investment. Iran and North Korea are the only countries to have been blacklisted so far. The International Monetary Fund has agreed to a US$1.4 billion emergency loan on top of the US$6 billion Pakistan borrowed from the IMF last year. The IMF estimates that Pakistan’s economy will grow by only 0.8% in 2020.

Khan, ever the optimist, has said that while no one is immune from the virus, ‘the country will emerge stronger from the challenge’ and will ultimately be ‘a totally different nation’. Let’s hope he’s right because it will take more than wishful thinking to ensure Pakistan comes out of this relatively undamaged.

Given the important role Pakistan plays in the critical geostrategic region of South Asia, the last thing the world needs is for such an important, nuclear-armed country to fail. This will be Khan’s ultimate test.

US terror designation for Balochistan Liberation Army will be welcomed in Pakistan—and China

Last week, the US State Department designated the Balochistan Liberation Army (BLA) as a Specially Designated Global Terrorist. The Pakistani government officially declared the BLA a proscribed entity in 2006 following a number of terrorist acts against civilians and security personnel.

Notwithstanding the blandness of the official statement, Washington’s decision to put the BLA on the global terrorist list would have been welcomed by Pakistan. Also the timing of the announcement would not have been fortuitous. Prime Minister Imran Khan is scheduled to make a state visit to Washington next week, during which he will meet US President Donald Trump.

Ironically, and rather uniquely, this American decision puts Pakistan, China and the US on the same page, at least with regard to counterterrorism in the region.

The BLA, which was formed in 2000, is a terrorist organisation whose targets—civilian and military—are limited to the Pakistani province of Balochistan or entities involved with the province. The BLA has committed a number of terrorist acts in recent months, including a suicide attack in Balochistan in August 2018 which injured three Chinese engineers. In November last year it attacked the Chinese consulate in Karachi killing two policemen and two Pakistani civilians.

This was the first time the BLA had operated outside Balochistan. Two months ago, BLA operatives attacked the only five-star hotel in the port of Gwadar in which five people were killed. Attacks targeting Chinese nationals are nothing new. The first attack against Chinese workers was in 2004, when three Chinese engineers were killed in a car bomb blast in Gwadar.

It is the fear of further attacks against its own nationals which caused Beijing to demand that Pakistan provide a 10,000-man protection force for the thousands of Chinese workers involved in the construction of the US$46 billion China–Pakistan Economic Corridor (CPEC), the jewel in the Belt and Road Initiative crown. This military protection is supplemented with joint ventures between Chinese private security companies and local security firms with links with Pakistan’s armed forces.

Balochistan has been a restive province since partition in 1947. It’s a vast, arid, sparsely populated area which covers south-western Pakistan (44% of the country). It’s also rich in minerals and natural gas. On the whole, economic and political development has bypassed the inhabitants of that very large tract of land. The lack of effective integration into Pakistan has caused the problems that are seen today. A number of Baloch insurgent groups, precursors to the BLA, formed in the 1970s to demand a greater piece of the national pie and more autonomy. These groups engaged in a low-level insurgency, targeting pipelines and military personnel. The response was often ruthless.

Notwithstanding security risks to its workers, Beijing decided to proceed with the multi-purpose CPEC project. It includes the construction of roads, railroads and oil and gas pipelines to Kashgar in western China, as well as the completion of a number of coal, wind, solar and hydro energy plants, and the development of Gwadar. There are some legitimate doubts about whether CPEC projects will help Pakistan economically in the long term or further impoverish the country given the debt it will incur to China to pay for them.

Once completed, the CPEC, particularly the development of Gwadar, will turn China into a two-ocean nation. And consolidating this strategic toehold is the development of Jiwani, a joint Pakistan–China naval and air force base 80 kilometres west of Gwadar. This will be China’s second foreign military base, after Djibouti. Because Pakistan is effectively a force multiplier for China—enabling it to establish a critical geostrategic footprint in the western Indian Ocean—the risks to Chinese personnel from groups such as the BLA are worth taking given the massive reward down the road.

Given the political and financial investment respective Pakistan governments have put into the CPEC since its inception in 2015, Islamabad can’t afford to see it fail. This is why Washington’s decision to designate the BLA as global terrorists would be so welcomed in Beijing and Islamabad. The designation will give the Pakistani government carte blanche to seriously clamp down on the BLA and any of its fellow ideological travellers.

Importantly, Pakistan must be seen to be cracking down hard on all activities relating to terrorist groups by October so that it can avoid being put on the ‘blacklist’ by the Paris-based inter-governmental Financial Action Task Force. Blacklisting would make it difficult for Pakistan to borrow money from international institutions like the International Monetary Fund. The pressure on Pakistan to genuinely move against all terror outfits further increased when China finally relented and agreed to put Masood Azhar, leader of Jaish-e-Mohammed, which claimed responsibility for a deadly attack in Kashmir in February, on the UN’s list of terrorist entities in May.

While Washington can hardly be happy with Beijing’s deepening military ties with Pakistan and its increasing economic hold on the country, Khan’s visit to Washington should nevertheless go well. The Pakistani prime minister knows he has a couple of trump (no pun intended) cards up his sleeve. First, Washington knows Pakistan has not only been critical in ‘delivering’ the Taliban to the negotiating table, but Islamabad’s continued support for the Afghan peace talks is critical.

Second, Pakistan provides the shortest route for the overland delivery of supplies for Western military forces still in Afghanistan. The alternative is the northern route via Russia and the central Asian republics, but this is longer and much more expensive. Washington knows that, if necessary, Islamabad will cut off access, as it has in the past.

These inter-related issues demonstrate in stark terms how much the US–Pakistan relationship has evolved in the last 50 years or so. It’s changed from one where the US was the all-dominant partner calling all the shots to one where it’s now dependent on Pakistan to help it get out of an unwinnable situation in Afghanistan. And all this has happened with Pakistan’s new mentor—China—not having to fire a single shot.

Pakistan’s IMF problem

After Pakistan’s recent election, Imran Khan and his Pakistan Tehreek-e-Insaf (PTI) party are now forming a new government. As usual, it will be greeted by an economic crisis. A trip, cap in hand, to the International Monetary Fund seems inevitable.

Pakistan, after all, is an IMF addict. The country has already spent 22 of the past 30 years in a dozen different IMF bailout programs. As the former IMF advisers Ehtisham Ahmad and Azizali Mohammed explained in a 2012 working paper for the Asia Research Centre, no American, IMF or Pakistani official has any incentive to reform Pakistan’s structural economic problems, and so the cycle of bailouts continues.

Unfortunately, few in Pakistan have ever read Ahmad and Mohammed’s paper or debated its significance. If they had, they would know that the IMF’s approach to the country has been a failure. For decades, IMF programs have been undercutting Pakistan’s productivity and growth potential, by eroding governance and state capacity, and creating conditions for ever more rent-seeking and corruption.

Successive IMF programs have required that Pakistan adopt more withholding taxes (never to be refunded), surcharges and levies on essential goods such as oil and electricity, even though these measures hurt employment and investment growth. And when the government misses its fiscal targets, the Fund and Pakistan’s finance ministry agree on quarterly mini-budgets, which often include new taxes on school fees, bank transactions, internet access and so forth.

It should go without saying that if businesses do not even know what tax measures will be included in the next quarterly mini-budget, they will be unable to plan and invest. This is Economics 101.

Moreover, alongside distortionary tax policies, the IMF has forced the finance ministry into unplanned spending cuts without any real reforms, despite the obvious negative effect this has on growth. When such reductions were made under an IMF program in the 1990s, Pakistan’s national bus service ended up on the chopping block, and vehicles were allowed to deteriorate. Since then, funding for public services—including railways, police, health and education—has been cut to the bone.

In other words, Pakistan has been the subject of a long-running experiment in austerity. Hastily designed spending cuts have undermined growth, and thus the government’s fiscal position, forcing it to kill off public services and infrastructure projects. The result has been a severe erosion of state capacity.

To be sure, Khan’s new government and the IMF will talk of reform; but such talk is never followed up with action. Reforms to overcome Pakistan’s constant power shortages have been discussed for the last decade, and yet the losses continue to mount. With the costs of mismanagement passed on in the form of price increases, the debt held by private power producers and the government stands at over one trillion rupees (US$8.2 billion).

New IMF funding will no doubt lead Khan’s government to repeat past mistakes. It will cling to artificial exchange rates, while avoiding reforms that could actually plug leakages in state-owned enterprises. When the Fund was preparing its 2013–2016 program for Pakistan, I warned the deputy director overseeing the plan that it would be used to overvalue the exchange rate. She insisted that it would not. It was.

The pattern is always the same. With the Fund’s blessing, the government goes on a shopping spree, taking out costly loans for expensive projects, thus building up even more debt and adding new inefficiencies. After a few years, another crisis ensues, and it is met by another IMF program.

The short-term focus of these programs ensures that reforms will be postponed, and that obsolete industries will not be allowed to die. Meanwhile, education goes underfunded, energy and water shortages grow more frequent and severe, economic imbalances worsen, and the government’s policymaking capacity continues to erode. Rapidly achieving stable macroeconomic indicators is all that matters, even if doing so accelerates social and political decay.

It is precisely the rush to meet IMF-dictated fiscal numbers that leads to bad policies. In the absence of due process—such as parliamentary or cabinet scrutiny, ministerial and expert review, and domestic consultation—the finance ministry accrues more power, and governance declines. That is what happened under the previous government—which used an IMF program to push through vanity projects—and Pakistanis are now paying the price.

Sound macroeconomic policymaking cannot be conducted through arbitrary mini-budgets. The way to address economic imbalances is to spur growth in the real economy, which will allow for the accommodation of deficits and debts. As I show in my book Looking back: how Pakistan became an Asian tiger in 2050, economic growth and development require sound governance and ample state capacity. Those criteria can be met only through extensive, well-considered reforms over the long term. The question is whether the IMF will encourage that, or have Pakistan keep doing the same thing while expecting different results.