PM Imran Khan: Subsuming his pride to serve the nation
As Imran Khan took the oath of office to become the prime minister of Pakistan on August 13, the specter of an impending economic implosion haunted the nation.
The previous administration run by the Pakistan Muslim League Nawaz (PML-N) had succeeded in the aggressive accumulation of international debt without much consideration on how the external obligations would be paid back.
The new prime minister’s economic team was thus faced with an unsustainably-large external debt, expanding monthly trade deficits, and rapidly-dwindling forex reserves.
With more than $10 billion of external obligations becoming due in the coming months and with similar level of reserves, Pakistan was faced with a severe balance of payments’ crisis.
More than any other time in its history, the nation required a leader who had the vision and boldness of action to steer it out of its perilous position.
While earlier, PML-N ministers had blithely insisted that the country would not have to go to the International Monetary Fund (IMF) for financial assistance, the stark reality presented to the new Finance Minister, Asad Umar, made it abundantly clear that no option could be discarded.
He had to explore all avenues while ensuring that the burden of austerity measures was not borne by the most vulnerable sections of society.
A popular government, elected on the back of a wave of optimism, had to device a reform strategy that brought about necessary structural changes to improve the competitive dynamism of the economy, without imposing widespread unemployment and a sharp rise in poverty.
Given the magnanimity of the financial chaos inherited by the Pakistan Tehreek-e-Insaaf (PTI) government, some short-term pain was necessary to put the economy on an even keel.
Therefore, the new government moved swiftly to institute cuts in all wasteful government administrative expenses; set up taskforces to enhance efficiency in state-owned corporations; directed the FBR to expand the tax net and revenue, and enacted measures to move toward making the income tax regime more progressive than before.
Some of the measures included, for example, Imran Khan opting out of moving into the palatial PM House and selling the fleet of cars -- a move which may have been symbolic in nature but one which sent out a clear signal of intent to the public. If austerity measures were going to be implemented, it would start with the PM himself.
As part of the strategy to bolster forex reserves and secure some negotiation space with the IMF, PM Khan and his team embarked on a whirlwind round of trips to friendly countries, which included Saudi Arabia, the UAE, Malaysia, and China.
A popular government, elected on the back of a wave of optimism, had to device a reform strategy that brought about necessary structural changes to improve the competitive dynamism of the economy, without imposing widespread unemployment.
Javed Hasan
While doing so, the PM also candidly admitted that Pakistan was desperate for a cash injection. The public admission of being ‘desperate’ was met with derision by the opposition and several in the media. His team was criticized for its lack of maturity and ill-preparedness in the diplomatic complexities of seeking assistance.
The supposedly ‘desperate’ mission to raise funds was written-off by the government’s detractors as being destined for disappointment.
However, just as the clamor against the economic team’s incompetence reached its crescendo, Saudi Arabia announced a support package of $6 billion in short-term deposits and oil payment deferral facilities.
This was followed by an announcement from the UAE that it intends to deposit $3 billion in the State Bank of Pakistan "to support the financial and monetary policy of the country".
PM Khan’s efforts to humbly entreat friendly nations for help, in order to navigate the nation out of the dangerous swirls of imminent crises, had finally paid off.
The commitment of monetary infusion into the country’s treasury has much greater significance than simply tiding over the balance of payments crisis. Such substantial direct financial support to Pakistan is not only based on historical ties shared with its allies but also reflects their confidence in a leadership that puts national interest ahead of any personal consideration.
Moreover, Khan’s economic team has taken difficult decisions to demonstrate its determination to do what is necessary to put the economy in order.
Many of these are in line with the IMF’s requirements. The inevitable weakening of the rupee, the increase in interest rate by the State Bank of Pakistan, and the hike in gas and electricity tariffs were all painful measures for any new government to take, and in the short-term, detrimental to Pakistan’s growth.
However, they were essential to stabilize Pakistan’s balance of payments and initiate the necessary structural reforms in the economy.
As the year comes to a close, the funds brought in by PM Khan’s trips to friendly countries and potentially entering into an IMF program, greatly alleviate the country’s short-term economic difficulties. Khan's perennial detractors and armchair critics of his “begging" trips may continue to snipe at him for his lack of experience. But this much is clear; here’s a leader who through his actions demonstrates an unexpected ability to subsume his pride to serve and guide his people toward a brighter future.
