ISLAMABAD: Once Pakistan’s election winner Imran Khan forms a government, there will be little time to bask in his triumph: the country’s next prime minister will inherit a critical economic situation, and analysts say he must act fast.
The new leadership may be forced to seek a bailout from the International Monetary Fund (IMF) in the coming weeks.
Here are some questions and answers about Pakistan’s predicament:
Pakistan is on the verge of a balance-of-payments crisis, which threatens the stability of its currency and its ability to repay debts or pay for imports.
Its budget deficit has grown steadily over the past five years, from four percent to 10 percent of GDP.
Imports have skyrocketed, mainly due to rising oil prices. Between July 2017 and March, about 70 percent of the country’s import bill was for energy, machinery and metals, according to a State Bank of Pakistan report.
Meanwhile, exports — mainly textiles — have increased only slightly.
As a result, the country’s foreign currency reserves have declined to about $10.3 billion, according to recent figures given by the caretaker government.
This covers less than two months of imports, analysts say. Meanwhile, the rupee has been devalued four times since December, fueling inflation.
“We borrowed like crazy in the last four to five years, so it’s time to repay. But we don’t have... reserves,” former finance minister Hafeez Pasha told AFP.
Pakistan has gone to the IMF repeatedly since the late 1980s. The last time was in 2013 when Islamabad got a $6.6-billion loan to tackle a similar crisis.
Today, the country “needs at least $12 billion,” says Zeeshan Afzal, the director of Insight Securities, a Karachi-based consulting firm.
If approved, it would be Pakistan’s largest-ever bailout.
But it has not yet completed repayments on its previous loan, which could limit its current leeway with the Fund.
“Islamabad is betting on a maximum of $6.5 billion, hoping that this will have a virtuous effect on the confidence of the markets,” a senior diplomat, who asked to remain anonymous, told AFP.
Khan promised to create an “Islamic welfare state” on the campaign trail, but the plan — which would require big public spending on health and education — could be stillborn if the economy tanks.
“We will have weeks, not months” to act, Asad Umar, widely tipped to be the next finance minister, told the Financial Times on Thursday.
All options are on the table, he has tweeted, telling media that the new government is considering privatizing all state-owned companies, including the once-illustrious, now debt-laden Pakistan International Airlines.
But there are fears in Pakistan that the terms of any new IMF bailout will be stricter than in 2013, thanks to the tense relationship between Islamabad and Washington, one of the Fund’s biggest donors.
The US has warned that it will be watching closely to ensure Pakistan does not use IMF money to repay debts to China, which has poured billions into Pakistan for infrastructure projects under its Belt and Road Initiative.
Pakistani media have reported a recent $2 billion loan from China and another $4.5 billion from Saudi Arabia, though the transactions have not been confirmed. In any case, Saudi funds would only be used to buy oil.
In the face of a trade imbalance, Khan could try to reduce imports. But such measures have never borne fruit in a country with porous borders and numerous smuggling networks, especially for consumer goods — a major import item.
He could also seek to improve foreign investment. Khan has said his anti-graft campaign and clean government will improve the country’s image abroad, hopefully attracting investors who have been spooked by instability and structural issues in recent years.
The World Bank ranked Pakistan 147th out of 190 countries last year for its business climate.
Khan has vowed change on the home front too, saying his government will dramatically boost tax revenues. That is a major, perennial challenge: only a tiny percentage of those liable actually pay taxes in Pakistan.
A further massive devaluation of the rupee, which would deter imports and make exports cheaper and more competitive, could be considered.
But then “people would be in the streets,” predicts Pasha, the former finance minister.
“It would be the end of Imran Khan.”
Imran and the IMF: Pakistan’s bailout dilemma
Imran and the IMF: Pakistan’s bailout dilemma
Pakistan says it seized 32 square kilometers inside Afghanistan as border clashes escalate
- Security official describes ‘limited tactical action’ in Gudwana after Afghan assaults
- Islamabad accuses Kabul of sheltering militants as UN, China and Russia urge restraint
ISLAMABAD: Pakistan has seized a 32-square-kilometer area inside Afghanistan following overnight fighting, a security official said on Saturday, as cross-border clashes between the two countries escalated sharply.
A Pakistani security official, speaking on condition of anonymity, said troops carried out a “limited tactical action” in the Gudwana area opposite the Zhob sector along the frontier, capturing Afghan territory after responding to attacks on Pakistani positions.
“On the night of Feb. 26/27, posts opposite the Zhob sector launched anticipated physical attacks on multiple Pakistani positions,” the official said, referring to fighters linked to Afghanistan’s Taliban authorities, whom Islamabad identifies as Tehreek-e-Taliban Afghanistan (TTA).
“In response to aggressive unprovoked fire and physical attacks, Pakistan security forces launched a limited tactical action on the night of Feb. 27/28 in the general area of Gudwana with a view to capture TTA Tahir Post,” he continued, adding that 32 square kilometers of Afghan territory were seized.
The official said special combat teams crossed the border after preparatory bombardment, supported by intelligence, surveillance and reconnaissance assets providing “real-time battlefield awareness.”
He said 24 Afghan Taliban fighters were killed and 37 wounded, with no Pakistani casualties reported.
The claims could not be independently verified, and there was no immediate confirmation from Taliban authorities in Kabul of any territorial loss in the Gudwana area.
The latest clashes erupted after Pakistani airstrikes targeted what Islamabad described as militant hideouts inside Afghanistan over the weekend, triggering retaliatory fire along the frontier and sharply escalating long-running tensions. Islamabad accuses Kabul of sheltering Pakistani Taliban militants responsible for attacks inside Pakistan, an allegation that Afghanistan denies.
Pakistan’s Information Minister Attaullah Tarar said on Saturday evening that 352 Afghan Taliban fighters had been killed and more than 535 wounded since the latest phase of hostilities began.
Tarar said Pakistani strikes had destroyed 130 check posts, 171 tanks and armored vehicles and targeted 41 locations across Afghanistan by air. Those figures could not be independently verified.
The United Nations, as well as China and Russia, have called for restraint.
The United States said Pakistan has the right to defend itself against cross-border militancy.
