Recently International Monetary Fund (IMF) agreed to sanction the 13th IMF bailout package of $6 billion to the cash strapped Pakistan. However, the sanctioned amount is to be given in installment subject to the Pakistan implementing and adhering to all the conditions laid down for approval of the said package.
But will this money be enough for the country to keep its wheels of the economy moving? Will it be enough to come out of the balance of payments crisis and insufficient FOREX reserves which as of now may not afford even three months of imports?
IMF Bailout Package
The thirteenth loan in the last thirty years from the IMF, speaks a lot about the governance system and the economy of a country. Interestingly, Imran Khan, the current Prime Minister, blamed the previous governments for such condition and termed it as begging. This was one of his major agenda during the election campaign and he had even publically announced that he would commit suicide rather than going to IMF or any other country with a begging bowl. He managed to form the government but had to do a U-turn about begging, as very soon, he was visiting various countries asking for financial help. IMF was at the last on the list, though he knew, how important it was for Pakistan to get assistance from IMF as it could then facilitate other agencies coming forward for the help.
So, the IMF agreeing for the loan did bring some smiles back but it quickly vanished in the backdrop of World Bank arbitration court slapping a fine of $5.8 billion in damages to a multinational mining company, which discovered gold and copper deposits at Reko Diq in Balochistan only to have its mining lease arbitrarily canceled. In yet another setback Pakistan lost another arbitration case against the asset recovery firm Broadsheet LLC. $33 million is to be paid in damages and costs to the company hired by Pakistan’s National Accountability Bureau to search for the hidden assets of former Prime Minister Nawaz Sharif’s family whose contract was terminated without regard to international contract law.
Will the Slide Continue?
How much Pakistan’s debt-ridden economy can afford further bleeding? Not much. And what can help stop this bleeding? CPEC maybe? A $62 billion project touted as the ultimate source to bring back the economy of Pakistan on the tracks. But, once viewed as Pakistan’s great hope for job creation and economic development, in Pakistan’s latest budget, this leg of China’s Belt and Road Initiative is likely to have an estimated 60% cut in spending. Cynicism around CPEC is on the rise as investment projects seem to be failing to adequately address underlying obstacles to sustainable development and theirquestionable commercial viability have exacerbated Pakistan’s already severe fiscal and financial problems.
So, the question being asked is ‘Can CPEC still offers a Pakistan viable development path which can help the country tide over the existing economic crisis?’ Some stay optimistic but the majority feel otherwise. In the long-run, new network of roads, ports, and power plants may spur development and improve Pakistan’s fortunes but given to the Chinese lending practices vis-à-vis weak economy of Pakistan, CPEC may do more harm than good to the latter.