Pakistan appears to be scrambling around on a piecemeal treasure hunt of sorts. In July alone, the country borrowed $439 million in foreign loans in a bid to service forex requirements. And though this was not enough, the Chinese have been by far the most generous. With Beijing coughing up about two-thirds of all financial injections covering four infrastructure projects to the cool tune of $290 million. This is in addition to the $2 billion emergency loan aimed at propping up rapidly depleting foreign exchange reserves.
So far, so good. Our all-weather friend’s timely largesse is welcomed; especially at a time when the International Monetary Fund (IMF) is being publicly arm-twisted into rejecting any begging bowl that is Made in Pakistan. That being said, China’s investment here will eventually begin winding down as projects near completion. Thus the new government must look beyond quick-fix cash-splashing.
Finance Minister Asad Umar has said that the Centre is going to focus, at least in the short-term, on the private sector to deliver economic development. But even as it does so it must also look towards long-term spending on manufacturing. For this is the only way to build sustainable economic growth while addressing critical balance of payments deficits. In fact, it represents the most stable means of increasing export-led growth. Yet as things currently stand, Pakistan lags far behind both India and Bangladesh on this front.
Linked to this is the question of investing in transferrable skills for the future. The problem with banking almost entirely on infrastructure projects is that while this may feasibly fall into the manufacturing bracket — it contributes nothing to exports. Thus when the state invites international tenders for such concrete initiatives it must ensure that gains go beyond the monetary. Though even here, foreign partners typically seek a good return on their ‘down payment’. Or put another way, Pakistan must benefit from the sharing of technological know-how where the international competitor enjoys a comparative advantage in this or other areas. That overseas remittances account for the largest contribution to the national exchequer behind exports tells everyone everything they need to know about the importance of investing in manufacturing. For the latter will offer considerable relief when it comes to import reliance.
Then there is the equally vital matter of making investment opportunities lucrative for local partners. That is, instead of simply focusing on attracting foreign cash, Pakistan must do its best to prevent money from flowing outwards. Failure to do this will inevitably result in international companies enjoying a monopoly of sorts over what is meant to be a sovereign economy. And even if this is not exactly the case, as long as the local citizenry hold this perception it could give way to eventual unrest. After all, western countries found themselves not immune to civil society sit-ins as part of the Occupy Movement against bankers and the fat cats of big industry.
When all is said and done, in Pakistan’s case the key to a viable economy is political stability. That the country has recently witnessed only the second-ever transfer of civilian power in its history underscores the precarious situation confronting the new set-up. We therefore welcome Imran Khan’s decision to skip the UN General Assembly powwow scheduled for the beginning of next month. This is how he must mean to go on. *
Published in Daily Times, August 30th 2018.