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Khurram Hussain
THIS is more or less what it looks like. When power begins to slip from your hands, like sand pouring from between the fingers, the picture looks more or less like what we see happening in Pakistan today.
There is no organised force standing in the wings or spearheading the resistance to a government growing ever more desperate. But there is a rising arc of challenges to its writ, its policies, its mandate, its underlying financial viability. And in responding to these proliferating challenges, the government appears conflicted internally, cutting compromises where it knows it cannot fight, and breathing fire and brimstone where it seems the fight is already lost.
All the while its finance minister, the key interlocutor between the state and its creditors, is struggling hard to juggle too many balls at the same time. The quantum of Pakistan’s external debt is less of a problem compared to the sprawling number of creditors the country has accumulated over the past decade, and the near overwhelming schedule of maturities that the state now faces on a routine basis.
I’m reminded of some conversations I’ve had with people in important positions over the years. One was with the late Usman Aminuddin, one-time senior oil and gas executive and Pakistan’s petroleum minister in the early 2000s. He had been part of a group that met Akbar Bugti and other tribal sardars in Balochistan to defuse simmering tensions at that time.
The government appears conflicted internally, cutting compromises where it knows it cannot fight.
In 2007, I recorded an interview with him on Pakistan’s gas reserves, during which he said, “I was surprised to learn what the Baloch sardars were asking for”, referring to the demands they made from the Musharraf regime in those days. “It was nothing! They were asking for pocket change compared to what we were getting from them in return!”
A few years later, he repeated this remark in a televised talk show aired by DawnNews and hosted by Asad Umar, president of Engro at that time. He ended his remark, saying, ‘we all know how that worked out’ or something along those lines (I’m paraphrasing from memory). His point was that the sardars were actually asking for very little, and meeting their demands should have been easy, but Pervez Musharraf opted to make it into an ego dispute, which escalated and led eventually to the assassination of Akbar Bugti in 2006.
More than a quarter century later, Pakistan is still grappling with the insurgency that was triggered by the mishandling of the demands from the Baloch sardars, and fuelled further by the ham-handed way in which the Gwadar projects have been carried out. Thus did a political problem turn into an insurgency, which has now morphed into a raging separatist movement.
Even today, politics can help heal the rifts that the failure to properly negotiate an economic rent-sharing arrangement in the early 2000s created. Another conversation with a friend who is knowledgeable about Balochistan and is a social scientist comes to mind. “Maulana Hidayatur Rehman and Khushal Khan Kakar are two examples,” he told me once, listing details, “that when politics is left to its own devices, local leaders can emerge, and channelise popular discontentment and challenge established political hierarchies”.
“But oftentimes the security establishment perceives them as threats and tries to pre-empt their emergence,” he continued, listing numerous such examples. Despite everything, a vibrant civil society in Balochistan is still capable of growing a leadership for itself given the chance, he insisted. And this leadership can help heal the rifts that are gaping wider in that society with every round of fresh repression, if only an organic process of representative politics would be given the chance.
Another conversation I’m reminded of these days was with a former chairman PIA, and since he never mentioned this on record, I cannot name him. But I asked him what takes up most of his time, and he replied: “Managing the creditors! Every other day a new loan is falling due, and all our time is consumed trying to arrange the resources with which to meet that obligation or negotiate something with the creditor. There is no time or energy left for anything after this.”
Pakistan’s finance minister is in a similar sort of situation these days as he struggles to secure rollover assurances from his creditors, along with getting them to agree to reschedule at least some of the payments falling due during the years when the forthcoming IMF programme will be in operation. The details of what all is being sought, and how much has been granted thus far, are not known with clarity yet. What is known is that the exercise has now become too complicated and riddled with Catch-22 type traps, where the IMF demands a financing gap first be filled before the programme can commence but creditors demand that a functioning programme first be in place before they can commit funds. A breakthrough will probably be achieved, though it is not certain how long this will take.
It is no longer rocket science to see where this is going. Every year, it is getting harder to juggle the country’s external financing requirements. Every year, the calendar of maturities and repayments gets more packed than the preceding year. And every year the so-called ‘dance of the billions’ that Pakistan’s debt management operations has become gets more intricate, more complicated and more time-consuming. There is little time left for anything after this!
Prolonged inflation is pushing more people into despondency than ever before. Egos have mobilised a separatist insurgency. Meanwhile, the sovereign is sinking in the quicksand of debt. This is what it looks like when power slips through your fingers like sand. It is not one big challenge rising up before the ruler that should have him worried. It is the proliferating number of small ones, taking on different shapes at different places and times. Every problem is not a nail. Every solution is not a hammer.
The writer is a business and economy journalist.
khurram.husain@gmail.com
X: @khurramhusain
Published in Dawn, August 29th, 2024
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F.S. Aijazuddin
FEW know that following the defeat of Hitler’s Germany in 1945, Great Britain, which had ridden to victory on America’s shoulders, made a furtive attempt to destroy its other ally of convenience — Stalin’s USSR.
Without consulting the US, PM Churchill developed a plan — Operation Unthinkable — “to launch an immediate pre-emptive war against the Soviet Union in mid-1945”. He wanted to deliver a knockout blow to the USSR while it was still reeling from World War II.
Churchill had reasons to fear Stalin. By 1950, the Soviet Union had four million troops on hand, with another 800,000 on call from its Eastern bloc. The US had about 1.5m, spread thinly across the globe.
Saner voices in the US, however, saw merit (especially after the Berlin blockade of 1948 and North Korea’s attack on South Korea) in creating an alliance of like-minded Eurocentric countries as a bulwark against the Soviet bloc.
The Americans took the initiative. They worked towards the formation of Nato. The North Atlantic Treaty of 1949 became Nato’s birth certificate. It came at the expense of its sibling — the UN. While the UN aimed supposedly at ensuring “a globalised, peaceful world”, Nato was committed to defend only the North Atlantic area in “defensive action only, but built for confrontation”; ie, to be a dove, but with teeth.
For centuries, Britannia had ruled the waves. From the early 1900s, Pax Britannica had to yield supremacy to the more powerful Pax Atlantica. By parenting Nato, the US ended its policy of isolationism. It crossed its Rubicon — the Atlantic — and converted the rest of the world into its parade ground.
The US, instead of being a guarantor of peace in the last resort, became a belligerent of the first resort. On 9/11, two commercial aircraft flying into the World Trade Centre and one into the Pentagon fused that resolve into foreign policy.
The early years of Nato were mired in dissension. No one could be found to head Nato, and those who were exiled to it deplored its “organised controversy”. As one Nato official put it, the threats in the 1940s and 1950s were external. In the 1960s and 1970s, they were all internal.
Nothing, though, unifies as quickly as a common foe. The US paranoia of ‘a Red under every bed’ changed to ‘a beard under every turban’. Nato was induced to involve itself in Bosnia, Herzegovina, Somalia, Iraq, and, for the longest period (18 years), in Afghanistan, where at one time 130,000 Nato-led troops were deployed.
On July 8, 2021, President Joe Biden announced the withdrawal of US forces from Afghanistan by Aug 31. He reminded his allies of the reasons why they had invaded Afghanistan in the first place. Converting that forlorn failure into a mission accomplished, he argued disingenuously: “The US [and they] went to get the terrorists who attacked us on 9/11, to deliver justice to Osama bin Laden, and to degrade the terrorist threat [and prevent] Afghanistan from becoming a base from which attacks could be continued against the United States.” (The 50 Nato and non-Nato nations had nothing to fear.)
And in case the Afghans thought they might (like the postwar Germans and Japanese) benefit from the charred fruits of defeat, he disappointed them: “We did not go to Afghanistan to nation-build. And it’s the right and the responsibility of the Afghan people alone to decide their future and how they want to run their country.” In Afghanistan’s destruction lay its resurrection.
On Aug 30, 2021, the last US combatant to flee Afghanistan was Lt-Gen Chris Donahue. Eight months later, he would be in Europe — one of the first US soldiers there after Russia’s invasion of Ukraine. Only an American rattlesnake could swallow its own tail.
Some within Nato nurture ambitions to exploit its enormous potential. Collectively, its 32 member nations have a total population of over 955m. In their manpower and economics, if combined, Nato ranks third after China and India.
China, however, sees Nato through Russian lenses. It does not want to get involved in foreign conflicts. History has taught it the perils of invasion. India has yet to learn. Goa, Hyderabad and Jammu & Kashmir were in-house incursions. Since geography began, India has been paddling with one foot in the Bay of Bengal and the other in the Arabian Sea. It shares its Indian Ocean with other continents. The Atlantic Ocean, however, is 11,000 kilometres away.
PM Modi’s recent visit to Ukraine tests India’s 75-year-long friendship with Russia. To celebrate that anniversary in New Delhi, the Russian ambassador declared recently: “Dosti se zyada kuch nahi hota”. (Nothing is more precious than friendship).
Another slogan — ‘Hindi-Chini bhai-bhai’ — had a shorter shelf life.
The writer is an author.
www.fsaijazuddin.pk
Published in Dawn, August 29th, 2024
DAWN Editorial
THE waiting period seems to be getting longer. The fact that the IMF Board’s calendar of engagements for the first week of September does not feature Pakistan means that the approval for the new $7bn deal reached in July is unlikely to come before the end of next month. Many fear it could be delayed beyond September, despite Finance Minister Muhammad Aurangzeb’s recent reassurance that the Fund’s approval should be obtained by next month. But, then, he had earlier also predicted that the IMF would approve the deal this month.
The delay appears to have been caused by Pakistan’s failure to get debt relief from its major bilateral creditors, especially China, and to arrange $2bn in fresh loans to cover the gross external financing gap for the present fiscal. When the staff-level agreement was signed with the IMF, the minister had called the financing gap ‘manageable’. And when he went to Beijing to secure its commitment for another rollover of $4bn debt, he was confident of returning home with the cheque. In fact, he had also expected an agreement with China on re-profiling the nation’s energy debt of $15bn.
It was only upon his return that we learnt that the IMF’s approval of the new loan was tied to firm commitments from China, Saudi Arabia and the UAE that they would roll over their combined debt of $12bn. Later, he informed us that these friendly nations had accepted Pakistan’s debt relief request. However, they do not appear to have conveyed that to the Board.
The fact that the government has not arranged for new loans to fill the ‘manageable’ external financing gap was made public only when the loan approval was delayed, with Islamabad approaching Riyadh for an oil facility of $1.2bn and Middle Eastern commercial banks for $800m to cover the gap.
On Tuesday, the State Bank governor said that Pakistan plans to raise up to $4bn from banks by the next fiscal to plug the gap. According to him, Pakistan is in the ‘advanced stages’ of securing $2bn in additional external financing required for IMF approval. Pakistan will eventually get the required bilateral debt relief and IMF dollars.
Moody’s decision to upgrade Pakistan’s long-term issuer rating, following a similar announcement by Fitch, also indicates confidence in the approval of the IMF package. Yet the delay is now causing anxiety in the markets — especially because we still do not know whether Chinese energy debt relief is one of the IMF conditions or if the government is pursuing this separately.
Much of the worry over the loan stems from a lack of transparency regarding the cause of delay rather than the delay itself. A little less opaqueness would go a long way in keeping the markets calmer till things fall into place.
Published in Dawn, August 29th, 2024
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