Thursday June 30, 2022

The cost of economic dependency

May 23, 2019

Pakistan's protracted economic reliance on the US and some international financial institutions (IFIs) has seemingly deprived our geo-economically important country of an independent, proactive and robust foreign policy since the 1950s. The recent $6 billion monetary bailout package provided by the IMF will further squeeze the space for the government in terms of effectively diversifying the country's external relations.

Speaking historically, policy dictations from creditors have always played a key role in determining the direction and nature of the country's foreign policy, thus leaving very little room for the leadership in Islamabad to craft an autonomous policy.

Until Pakistan achieves economic self-sufficiency by restructuring its crisis-ridden economy, the US, Saudi Arabia and China will continue to have decisive sway on Islamabad’s foreign policymaking and its execution. Heavy economic dependence does not allow a sovereign country to chart out an independent path with respect to its external policy so that its creditors continue affording timely economic bailout packages and security assistance to it. Unfortunately, Pakistan is among those developing countries in the global South which has been blindly reliant on the US and IFIs for economic packages since its inception.

In retrospect, our heavy financial and security reliance on the US compelled us to join Seato and Cento in the 1950s, and we partnered with the US to inflict a crushing defeat on the erstwhile Soviet Union in Afghanistan in the 1980s. Similarly, Pakistan's economic and security needs were the driving factors which led the country to align with the US in the protracted war on terror in the Pak-Afghan region after the 9/11 incident. Though the US-led war on terror has so far cost Pakistan over $130 billion in economic losses and about 70,000 lives, Islamabad still seems to have no choice but to continue fighting this desultory war.

In his recent speech to the National Assembly, Foreign Minister Shah Mehmood Quraishi categorically spoke about the threats being posed to the nuclear assets of the country. He, however, deliberately refrained from pointing to the US. The threat to the country's non-conventional weapons has been discussed by Vali Nasr in his book, ‘Dispensable Nation: American Foreign Policy in Retreat'. The government is alive to the fact that the IMF has agreed to bail out Pakistan's faltering economy with $6 billion loans, after having received a nod from the Trump administration.

Despite being a neighbouring country sharing convergent economic, security and geopolitical interests in the past, all successive leaderships in Pakistan have shown outright reluctance to forge robust ties with Iran since the 1990s. The Rouhani-led government offered 1,000 MWs electricity to Pakistan at a cheap price during Prime Minister Imran Khan's visit to Tehran in April this year. Moreover, Iran has also shown its interest to coordinate with Islamabad to stamp out militants, insurgents and terrorists based along the Pak-Iran border. But, the $6 billion economic bailout package from Saudi Arabia too sits heavy, making it difficult to move seriously to foster economic and security bonds with Iran in the immediate future.

Russia is presumably back from the death of the 1990s. Both Pakistan and Russia decided to keep their cold-war rivalry on the back-burner during the latter period of former president Pervez Musharraf. As a result, Moscow lifted the arms embargo on Islamabad in 2014 and allowed it to purchase four Russian MI-35 helicopters. Unfortunately, Pakistan has failed to enormously benefit from Russian defence, energy and agricultural sectors mainly due to the fear that Islamabad's closer to Moscow may bitterly anger the former's Western creditors, especially the US.

Under the supremacist BJP government, India continues to spend a substantial amount of money and employ diplomatic expertise to isolate Pakistan in the world. Today, India has succeeded to have its research scholars working with all major think tanks of Europe and America. New Delhi takes advantage of these Indian scholars to shape public opinion and influence policies of governments in the West against Pakistan. The adroit use of soft power by India against Pakistan has made some Western countries look at Pakistan through the lenses of terrorism and militancy. And Islamabad is lagging behind in terms of countering Indian diplomatic propaganda due to its lingering leadership crisis, R&D issues and potential financial constraints.

Whenever a sovereign nation-state is faced with myriad economic issues, it can hardly spare adequate time, energy and resources to ponder over the impediments faced by its foreign policy. There seems to be a lack of coordination between the Foreign Office and the foreign minister. Foreign Minister Shah Mehmood Qureshi stated that Pakistan would not take sides in case of conflict between Iran and the US in the Persian Gulf. After a few days, the Foreign Office issued a statement blaming the US for willfully escalating tensions to drag the region into another major war. Effective and timely coordination between the FO and the country's foreign ministry is essential to evolve a detailed, mature, sagacious and feasible response to the diplomatic crisis in Pakistan's sphere of influence or interests.

Though the US deployment of the fleet with B-52 bombers and a strike group in the Gulf is designed to exert mounting pressure on Iran so that Tehran agrees to negotiate its ballistic missile programme with Washington, any misadventure or miscalculation such as attacks on Saudi oil tankers could lead to war. Pakistan's economic issues have led the incumbent government to adopt a neutral policy on the unfolding situation in the Gulf.

However, a neutral policy on this serious matter by Pakistan or other countries would indirectly embolden the US and the B-team to further tighten the noose around Iran. This does not bode well for Pakistan because any misguided attack on Iran would create gigantic security and economic problems for Pakistan in the form of Iranian refugees and the emergence of assorted militant and insurgent outfits to establish their sanctuaries on the Pak-Iranian border. Pakistan should play the role of an effectual mediator through back-channel diplomacy to help diffuse the brewing tensions between the US and Iran.

Another very serious development on the horizon is related to costly cases filed against Pakistan in some international courts of dispute settlement. The prime minister's special assistant for information and broadcasting, Firdous Ashiq Awan, has lately revealed that Pakistan is facing 46 cases in dispute settlement courts. While fighting these cases, we have spent about $100 million so far. The judiciary's recurrent intervention in these projects and phony accords of past governments with some international companies have led the country to this economic and diplomatic precipice.

The government should restructure the economy, broaden taxation, stop money laundering, encourage foreign direct investment and resolve the issue of trade deficit. It should also settle the country's financial-related cases with foreign firms out of dispute settlement courts. Equally importantly, the political leadership should avoid signing forged accords with foreign companies and the judiciary must weigh the financial cost before terminating the country's agreements with foreign firms.

The writer is an independent researcher.


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