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Munir Akram | Updated August 05, 2018
IN the late 1970s, China’s leader, Deng
Xiaoping, remarked that “development
is the only truth. If we do not develop,
we will be bullied”. Today, China cannot
The writer is a former
be bullied. Pakistan ambassador to
the UN.
Not so, Pakistan.
The popular mandate received by the PTI on July 25 reflects,
above all, the desire of the majority of the Pakistani people for
national selfrespect and an end to the corruption and crony
capitalism which has stunted the country’s growth,
bankrupted its treasury and enlarged inequality and poverty.
The new government’s primary obligation is to deliver on
development.
The development challenge is all the more formidable
because, apart from the anticipated obstruction from the
‘ancien regime’, the incoming PTI government confronts a
hostile external environment.
There is an emerging consensus that to halt the haemorrhage
of its foreign exchange reserves and stabilise the economy,
Pakistan will be obliged to approach the IMF for another
bailout. Unfortunately, this may not be easy to achieve.
PakistanChina ties must be
developed on the basis of
convergent strategic objectives.
In a blog, Mark Sobel, a former US representative to the
IMF, has advocated tough conditions for a staggered IMF
programme for Pakistan: further rupee depreciation, higher
interest rates, larger tax revenues and structural reforms
(higher energy prices, agricultural taxation, privatisation of
stateowned corporations, and reduced defence spending).
Notably, the PTI’s platform incorporates several of these belt
tightening measures.
Read: IMF and CPEC debts
However, Sobel added that the Fund “should ensure that its
resources are not used to bail out unsustainable Chinese CPEC
lending. The Fund needs to have at its fingertips
comprehensive data on all CPEC lending — its terms,
maturities and parties involved”.
US Secretary of State Mike Pompeo has jumped on this
demand. In a NBC interview, Pompeo said: “There is no
rationale for IMF tax dollars — and American dollars — to bail
out Chinese bond holders and China itself”.
The malice reflected in this assertion was thrown into bold
relief by the clarification from Pakistan’s last finance minister
that the average interest on CPEC loans is three per cent; most
loans have fiveyear grace periods and that repayment of loans
and profits to China in the next five years will be less than a
billion dollars (a small fraction of the scheduled debt service
to the West).
A demand that Pakistan restructure (only) the Chinese loans,
or that the IMF monitor and control the terms and progress of
CPEC projects, will be obviously unacceptable to both
Pakistan and China. Pakistan may have to do without an IMF
package.
The purpose of US ‘bullying’ is no longer simply to secure
Pakistan’s cooperation on Afghanistan.
The Trump administration has now basically accepted the
position, long advocated by Pakistan (and Imran Khan), that
the conflict in Afghanistan can be ended only through direct
negotiations between the US and the Afghan Taliban.
Pakistani officials have claimed that they facilitated the
reported direct USTaliban talks in Doha recently. The US has
so far refused to officially acknowledge these talks, much less
Pakistan’s facilitation. On the contrary, US statements
continue to blame Pakistan for the Taliban’s ascendant
insurgency.
The US may continue to demand Pakistan’s help if its talks
with the Taliban run into difficulties. But now that it has
opened a direct channel with them, the US may well seek to
circumvent Pakistan. According to US reports, the US and the
Taliban are both flexible on a powersharing formula and the
Taliban are willing to consider the continued presence of some
US troops in Afghanistan.
The US objectives in this region now are: the strategic
containment of China and Russia, an Indiadominated South
Asia and the reversal of Iranian power.
Pompeo’s position on the IMF package reflects a US attempt
to exploit Pakistan’s financial vulnerability to retard the
execution of CPEC and damage China’s broader Belt and Road
Initiative objectives.
Editorial: US arrogance
Pakistan may have no option but to rely on China’s financial
support to stabilise the economy. China has been generous so
far in extending balanceofpayments support to Pakistan and
it is likely to be helpful in future also. China can also be a
major source of foreign investment in Pakistan.
To counter US and Indian machinations, CPEC’s execution
should be accelerated and its scope further expanded to reflect
the PTI’s priorities of job creation, social and human
development, and agricultural and industrial growth. As part
of the envisaged Special Economic Zones, a wellconsidered
plan can be developed to relocate noncompetitive
manufacturing from China to Pakistan (instead of other Asian
countries). The original vision of Gwadar as a major
petrochemical processing and transshipment centre should
be realised.