On Pakistan’s trajectory, the International Monetary Fund (IMF) is a riff– a repeated tune that appears regularly while other parts change (as in a piece of music). It is disgraceful for a sovereign country to assume the status of a begging bowl and keep on seeking the IMF’s help to sustain its economy.
In the recent 10-day loan talks with the IMF, Pakistan has so far agreed to impose taxes of Rs 170 billion, besides reducing untargeted gas and energy subsidies, increasing levy on diesel, and reducing circular debt in energy sectors. It means that a flood of price hikes is impending to strike the masses. The question is this: is it justifiable? For how long would the masses afford taxes and consequent hyperinflation?
For the fiscal year 2022-023, Pakistan announced a defence budget of Rs 1.53 trillion ($7.5 billion). The allocation was a 12 percent increase over the original military expenditure in 2021-2022. To justify the rise, it was said that the increase would be offset by rising inflation. The question is this: why was inflation on the rise? The answer is this: high expenditures in non-developmental sectors such as defence. That is, in the given state of the economy, high non-developmental expenditures (high defence expenditures) beckon high inflation.
If just one-third of the defence budget, say Rs 500 billion, is spent in the developmental sectors such as education, health, micro-finance, infrastructure (such as road, sewerage, sanitation and water treatment plants), inflation will take a nosedive, as happens in developed countries. For instance, the youth bulge necessitates the presence of the government’s microfinance facility to extend loans to educated and skilled youth to enable them to run their own small businesses. With the advantage of nuclear assets and missile technology, Pakistan needs a small, trained, affordable military.
Currently, Pakistan has to confront two challenges: first, how to come out of the economic crisis and, second, how to revive the economy. Coming out of the crisis does not automatically mean the revival of the economy. One of the solutions for both the challenges is this: reduce the defence budget by a half.
Pakistan has to understand that the era of foreign aid to fight proxy wars is over. It is disheartening to see the way the poor of this country are served with emotionalism. The poor have been the victims of nationalist mottos and jihadi calls. Under the spell of nationalism and jihadism, they cannot question the reasons for their perpetual poverty. The next choke point is the Constitution of Pakistan which has made the army and the judiciary sacred cows. If only this bar could be lifted!
Pakistanis have not yet reaped the benefits of developmental expenditures. One of the reasons is that, despite its yearning, Pakistan is not a welfare state. Instead, Pakistan is a security state, which is in direct contrast to the original, inherited status of Pakistan, a feudal state. Nevertheless, the security state found the judiciary a formidable competitor. After weighing the strength of each other, both joined hands to rule over the country.
Within the context of Pakistan as a security state, an observable trend is that every Chief of Army Staff remained desirous for two things: first, look after the welfare of the Army, even by exacting more funds from the governments; and second, leave a legacy behind to be remembered. As if this were not enough, the next trend crept in: seek more financial benefits, through either getting a job extension or ensuring a post-retirement job. The way retired navy admirals got employed in a real estate-related construction company to serve its interests, retired army generals also followed suit. Loyalty has been boiled down from serving the country to serving the company.
It is said that Richmond Hill (Ontario, Canada) takes pride in offering permanent housing to a number of retired Pakistani generals, air marshals, and admirals, who grace the area with their families. Certainly, Canadian immigration is powerful enough to dilute the nationalism of even stalwarts, who kept on defending Pakistan’s ideological boundaries till the day of retirement. Seek pension and get privileges from Pakistan and live abroad. When millions of rupees are converted into foreign currencies, one of the reasons for the devaluation of the rupee is understood. The question is this: is the IMF ignorant of these practices?
Within the context of Pakistan as a security state, Pakistan revels in the delusion that it would be required for another “Cold War” which could be fought between any two superpowers, say between China and perhaps the usa, and that either of them would be offering Pakistan funds to stay by its side. The delusion is understandable against the background that Pakistan’s whole war machinery has been devised to thrive on a Cold War. If there is no Cold War, Pakistan has to construct one.
Interestingly, Pakistan also indulges in the delusion that it is the most sought after country in the Muslim World, desperately looking for a leader. The delusion is understandable against the background that Pakistan is ever ready to extend the tentacles of its war machinery to the Middle Eastern countries, where otherwise most Pakistanis live as labourers.
The current economic crisis has smashed both delusions of Pakistan. All superpowers and all Arab countries have brought Pakistan back to its senses by compelling it to meet the IMF’s conditions first, and then expect any financial help from them.
Out of the talks with the IMF, Pakistan has come out successful on only one point: the IMF has permitted Pakistan to raise fund allocation for Benazir Income Support Program (BISP) by Rs 40 billion (from existing Rs 360 billion to Rs 400 billion). Here, Pakistan overlooks that the BISP may help the poor withstand abject poverty, but the BISP cannot help the poor come out of the invidious grip of paucity. In the given state of the economy, it means that every year more people would be joining the poverty bracket, thereby instigating any sitting government to allocate more funds to the BISP. Is this the goal of Pakistan?
Currently, Pakistan has to confront two challenges: first, how to come out of the economic crisis and, second, how to revive the economy. Coming out of the crisis does not automatically mean the revival of the economy. One of the solutions for both the challenges is this: reduce the defence budget by a half.
