Neo-economic challenges


Dr Qaisar Rashid

Hardly had the International Monetary Fund (IMF) issued the second tranche of $700 million to Pakistan, when Iran showered a cer­tain area of Panjgur District (Balu­chistan) with missiles on Janu­ary 16. Iran called it a surgical strike against the terrorist groups which had sought ref­uge in Punjgur but which had been functioning against Iran’s integrity. Pakistan called it an unprovoked and unjustified attack, which prompted Pakistan to retaliate to level the score on January 18.
Pakistan is a cash-strapped coun­try looking for avenues to earn mon­ey or secure funds. If the Revolutionary Guards of Iran have to conduct mili­tary exercises along the shared bor­der to impress or intimidate Pakistan, the latter may reciprocate. The cost of mere vigilance would put an unneces­sary strain on defence expenditures. Along with that, if the quiescent phase of the Tehreke Taliban Pakistan (TTP) is turned into an active one, Pakistan would be in financial distress. It is dif­ficult to contemplate that the TTP does not take advantage of the situation. Though Pakistan is capable of manag­ing (or defending) both Pak-Iran and Pak-Afghan borders militarily, funds would be drained and attention would be diverted. The economic ease which reached Pakistan through the IMF would dissipate swiftly.
Holding general elections slated for February 8 is imperative to bring in a newly elected government which would negotiate the third tranche of $1.1 billion with the IMF in early March. The immediate concern of the new gov­ernment would be to make the bud­get for the Financial Year (FY) 2024-25. For that matter, from March to June, the government would have to do three main things: first, privatize the select­ed underperforming debt-incurring government-run organizations; sec­ond, reform the national tax machin­ery to make it collection efficient; and third, impose new taxes on the hither­to untouchable areas of the economy to broaden the tax base. Without un­dertaking these steps, the IMF cannot be pleased to continue with supporting Pakistan financially for the FY 2024-25, and afterwards.
Pakistan must be repenting on the timing of the Iranian missiles’ strike, which provoked Pakistan to launch a counter-strike. The edge of a precipice on which Pakistan is perched is that any escalation of conflict – most prob­ably on the western border – would consume the economy. Moreover, the conflict would vitiate the atmosphere in which foreign investment could be possible, whether or not in the field of agriculture (corporate farming). The challenge is graver than that. Where­as the general elections are approach­ing fast, Pakistan’s western border is gaining traction to decide if the elec­tions would take place on the due date of February 8 or not.
Nevertheless, the incipient Pak-Iran conflict, though limited to mis­sile strikes only, has brought the issue of Baloch missing persons to the cen­ter stage of the international media. In chilling cold, Baloch women and chil­dren have been staging a sit-in in front of the Islamabad Press Club to retrieve their beloved ones from the clutches of the state. The sit-in would have been disposed of, if Riina Kionka (Ambassa­dor of the European Union to Pakistan) had not expressed her concern (on De­cember 22, 2023) over manhandling the Baloch protestors. Pakistan has yet to learn how to respect human rights. The state refuses to drop coercion.
On the other hand, exchanging mis­siles to destroy militant hideouts sim­ply means two things: first, both Iran and Pakistan acknowledge that they have been enduring a separatist move­ment revolving around Baloch dissi­dents; second, both countries acknowl­edge that they clandestinely harbor Baloch separatist militants fled from each other. In other words, the missile exchange offers an expose.
Even if the calm prevails over the Pak-Iran border, both countries would take measures to purge their areas of the hideouts of militants launching terror­ist strikes across the border. It simply means that Iran would be taking action in its Sistan-Balochistan, and Pakistan would be cleansing its Balochistan. It also means more defence expenditures.
The missile exchange submerged another crises which Pakistan is go­ing to face in the wake of the gener­al elections of February 8. A large po­litical party (Pakistan Tehreke Insaf), which made the government after the last general elections in 2013, has lost its electoral symbol. Its members are now contesting the forthcoming gen­eral elections without a unified par­ty symbol. With that, the seeds of dis­contentment have been sown. It simply means that after the elections, society would remain awash with a number of discontented citizens.
Discontentment in society is bound to do two things: First, discontent would influence the economy by infusing un­certainty into the future, especially jeopardizing the prospects for foreign direct investment; and second, discon­tent would turn any financial stum­ble into an upheaval (such as protest strikes against privatization, tax impo­sition, and price hike) in society. This kind of era of instability may be evident immediately after March, when the IMF would be unsparing, while the compul­sion to make a taxation-laden budget would be immense.
The caveat is that, as per Moody’s Investors Service, for the ongoing FY 2023-24, to fund external payment obli­gations, “Pakistan has about $25-26 bil­lion worth of external debt repayments (including interest payments).” More­over, Pakistan needs the same amount to service external payments for at least the next two financial years. That is, on average, Pakistan has to service the loan of around $2 billion a month.
Refusing to concede this huge finan­cial liability, Pakistan has got entangled in the region (though unwillingly with Iran), and in the domestic scene (though Pakistan can mollify the Baloch (wom­en) protestors demonstrating in Islam­abad, and Pakistan can ensure that no political party is contesting the upcom­ing general elections without having its desired electoral symbol allotted.)

The writer is a freelance columnist. He can be reached at