Gloomy scene. Pakistan’s economy in dire straits

The year 2022 is one most Pakistanis would look back on as an unprecedented economic nightmare, with its economy in the doldrums. Pakistan was also hit by catastrophic floods, even as political rivalries were rendering the government virtually dysfunctional. Monsoon rains poured on the country, seriously affecting the lives of 33 million people, while leaving 1,730 dead.

Floodwaters drenched one-third of the country, washing away more than two million houses, and displacing eight million people. There has naturally been a spread of water-borne diseases, and serious damage to 13,000 km of roads. International studies have indicated that the floods have inflicted damages amounting to an estimated $30 billion.

According to recent World Bank reports, Pakistan’s economy is expected to grow at around 2 per cent in the current financial year, ending June 2023. Moreover, the recovery rate will be gradual, with real GDP growth anticipated to touch 3.2 per cent, in fiscal 2024.

Amidst all these complexities, there also appear to be differences between Pakistan’s Finance Minister Ishaq Dar and donors like World Bank and the IMF. However, after meetings with officials of the two entities in an ‘International Donors Conference’ in Geneva, Prime Minister Shahbaz Sharif claimed the meetings were extremely successful.

He noted: “At the conference, pledges worth $9.7 billion were announced for the Pakistan flood victims.” He added: “Islamic Development Bank promised $4.2 billion, World Bank $2 billion, Saudi Arabia $1 billion, Asian Infrastructure Development Bank $1 billion, Asian Development Bank $500 million, USAID $100 million, China $100 million, Italy €23 million, Japan $77 million, Qatar $25 million, UK £36 million, and France $10 million.”

The UAE subsequently announced its readiness to contribute $2 billion as economic assistance to Pakistan. It is, however, clear that donor countries will formally move ahead only after Pakistan completes its negotiations with the IMF, which should under normal circumstances take a few weeks. While donor countries’ contributions will be on concessional terms, financial institutions would charge their normal rates.

While large sums are said to have been pledged to Pakistan by Prime Minister Nawaz Sharif, the actual disbursement can commence only after the IMF clears the measures the government has proposed. On January 11, Finance Minister Ishaq Dar revealed that 90 per cent of pledges made by international donors were project loans, which will be rolled out over the next three years.

Most importantly, Crown Prince Salman of Saudi Arabia has now indicated his readiness to help Pakistan. He received Pakistan’s new Army Chief, General Syed Asim Munir, in Riyadh. It is now clear that in keeping with their close relations with the Sharif family, Saudi Arabia is ending its virtual boycott of Pakistan, imposed during the Imran Khan years, and returning to the days of close cooperation with the Nawaz Sharif family. While the Biden Administration has agreed to provide $450 million to Pakistan to maintain its fleet of US supplied F16 fighters, there is no sign that the Administration will bear the costs of these arms transfer for the virtually bankrupt Pakistan.

In a recent TV Interview, Pakistan’s Interior Minister Rana Sanaullah proclaimed that Pakistan could target TTP (Tehriq-e-Taliban Pakistan) militants in Afghanistan, if the Afghan authorities in Kabul did not take action against them. The Pakistan Government believes that the TTP has 7,000-10,000 cadres based in Afghanistan and in the Pashtun tribal areas of Pakistan.

Virtually mocking at Pakistan, Afghanistan’s Deputy Prime Minister Ahmed Yasir warned Pakistan of the serious consequences of attacking Afghanistan. He simultaneously tweeted a photograph of General AAK Niazi signing Pakistan’s document of surrender in Bangladesh, on December 17, 1971. Pakistan has only itself to blame for the rise of Tehriq-e-Taliban, as it looked the other way while playing host to Taliban leaders and cadres on its soil. Some of these leaders have assumed important Ministerial positions in Kabul after US forces withdrew from Afghanistan.

Support justified

Pakistan had justified its earlier support for the Taliban, claiming that a Taliban presence in Kabul gave it strategic “depth against” India. This, after the Taliban colluded with Pakistan’s ISI during the hijacking of IC 814, to Kabul. While New Delhi has not yet formally recognised the Taliban, it has established a correct working relationship with it, while providing wheat, medical and other assistance for the people of Afghanistan and maintaining an Office in Kabul.

Like Russia and China, India has avoided taking an adversarial or judgemental position on its relations with the Taliban. India’s food, medical and economic assistance for the people of Afghanistan will hopefully continue in a measured manner. Pakistan is now threatening to attack the Tehriq-e-Taliban members resident in its Pashtun dominated tribal areas, and across the border in Afghanistan, obviously with US encouragement and support. This would well result in uniting Pashtuns on both sides of the Durand Line, to take on the Pakistan army in a messy, bloody and unwinnable conflict. It has been indicated that an estimated 374 Pakistani security personnel and 365 TTP fighters were killed in combat in the last year.

It is now emerging that there have been deep divisions within Pakistan on how to deal with India. Pakistan’s former Army Chief General Bajwa, who had a close relationship with the US, was arguing that it was important to take measures to cool tensions with India for cash-strapped Pakistan to recover from the current economic disaster.

Moreover, realists in Pakistan recognise that tensions on its borders with India can have disastrous consequences on the national effort needed to restore a measure of political normalcy and a climate conducive to economic growth. It is also clear now that Pakistan’s relations with the Taliban are becoming uncertain and tense. Pakistan’s threats of military action against its own Pashtuns in the Tehriq-e-Taliban, both within the country and across the border with Afghanistan, will inevitably lead to tensions and conflict not just with the Tehriq-e-Taliban, but also with the Taliban leadership in Afghanistan.

The writer is a former High Commissioner to Pakistan