Pakistan seems to be riding a downward spiral. Or, perhaps it’s already in a state of free fall. However, even with Khan now firmly in saddle for a reasonable period of time, no policy decisions seem to have been taken to turnaround the economy. The story remains the same day-after-day: get other countries and international institutions to bail it out with loans that it can never repay. The author paints a broad canvas of the situation in Pakistan with bits and pieces covering a large enough mosaic to undertake some well-defined prognosis.
When did the last kingdom or people flourish in the Indus Valley after the Dravidian civilization? Reflect. The Indus Valley, historically war-torn, crisscrossed by turbulent hordes, tribes, kingdoms and empires, is cursed. Pakistan has inherited the ‘The Indus Curse’. It will remain our neighbour in its unnatural form in a state of constant turbulence. In this eternal paradigm, the current crisis sets a new stage for the new Government. Pakistan, our old foe, has new factors which will make it behave differently. The expected behavioural change is broad but predictable. ‘Naya’ Pakistan must be countered effectively in case the Indian growth trajectory is to stay the course.
The Pakistani Constants
Pakistani existential constants will not change. The fundamental constant- Anti India is Pakistan. A whiff of an Indian threat brings about national coalescence. Hyphenation with India to seek parity is permanent. Pakistan’s belief that it is a better country, is narcissistic. Blackmail to force the international immunity to keep it afloat or face a nuclear consequence of a lone wolf(s) action, will endure. Parasiting on one leading power or the other will continue. China is the latest host. Pakistan, always on the edge of collapse, will attempt Houdini acts, to stay afloat by externalizing the situation. Today the wolf has entered its compound. It is to be seen if the Red Riding Hood can survive. The future trajectory of Naya Pakistan needs second-guessing.
In 70 years, Pakistan has developed an armed capability to sustain its constants. The three components of its military need to be recognized in their correct perspective:
The Army. The Army has lost all wars, half the Pakistani nation and people. The remnant nation has no other option but to rally around it for survival. There is nowhere to go even if it cannot win a war.
The Nukes. Pakistani nukes cannot be used against India or anyone else. They are useful for international nuclear blackmail. This has been refined to an art.
The Terrorism. State promoted sponsored terrorism is the useable war waging tool since Zia Ul Haq’s societal radicalization. It has bred an unbridled terror apparatus, now possibly beyond State control. Terrorism is the spearhead of its external capability and nuclear blackmail. The Deep State will continue to promote it one way or the other.
Arming the military is a priority. What is leftover in the tattered economy will then be given to the nation. Skimming the top through institutionalized corruption by the military and the politicians won’t change. India must contend with an ever-growing military irrespective of other conditions. The Army has the State after all.
Pakistan will addictively seek ‘Strategic Space’ In Afghanistan with a Taliban government under its control. However, the landscape has changed. While the USA is making a deal with the Taliban to exit Afghanistan hurriedly, no one including Pakistan is going to have a free run. Internment of Mullah Baradar by Pakistan and elimination of Mullah Mansur by the USA in Baluchistan would have changed Taliban character and queered the Pakistani pitch. Pakistani Taliban (TTP) is again making noises. Both indicate a restive Durand line. The relations between Pakistan and the current Afghan government are low. It will not accept the Taliban in a hurry. Chabahar Port and the Zaranj-Delaram Road built by India have opened an alternate gateway to Afghanistan beyond Pakistani reach. Afghanistan is messy, whose instability will increase and endure. Afghanistan will be an unaffordable drain on Pakistan’s weak economy. The worry in India would be a diversion of foreign fighters into J&K.
Baluch armed rebel groups are transforming and modernising. Violence has expanded from rural to urban areas. 59% of deaths due to violence in Pakistan last year have been in Baluchistan. There is a major issue of missing persons. Social indicators are poor and unlikely to improve. CPEC is seen as destructive and exploitative by Baluchis, having contributed maximum resources with minimal return (4.5%). Quetta, once the hotbed sanctuary of Afghan Taliban, will fester now with indigenous Taliban also. The Army dictates Baluchistan policy with a heavy hand. Baluchistan, the most affected by internal violence, will worsen. Baluchistan- the Weak Heart of CPEC will force Pakistan to commit more military resources for the security of the Durand Line and CPEC.
Despite the fanfare, CPEC is facing headwinds. The first phase CPEC projects remain financially unviable. Investment for the second phase is delayed. Transactions remain opaque. Exact borrowing and cost of borrowing are not known. Cost-benefit analysis are elusive. How CPEC finances will be reconciled with an IMF loan is a Sherlock Holmes mystery. Will it lead to the Hambantota model? Very likely! Transmission of radicalism through CPEC to Xinjiang is inevitable. Attacks on Chinese are increasing. Gwadar development is turning out into a sour dream with haywire growth, land sharking and poor infrastructure. CPEC will dominate Pakistani, Chinese and International headlines. It is already the third front of Pakistan.
Water is unglamorous, but it is the werewolf. Pakistan lacks water storage capacity. The two major dams – Tarbela and Mangla have reduced storage due to silting. Water flow variability/availability between summer and winter affects agriculture adversely. Most water-related projects are out of CPEC, but agriculture is a major part of CPEC! Mr Imran Khan has asked NRIs for ‘Chanda’ (donations) to build dams! Sometime between 2025 and 2030, Pakistan will move from being water ’stressed’ to water ‘scarce’. It will trigger a major crisis in its agriculture, livelihood and economy. The internal security and political situation will only worsen. If Pakistan survives the current crisis, it will seamlessly slip into the next due to water. The key lies in making peace with India.
25 per cent currency devalued in 2018-19. Likely to plummet further. SBP policy rates up by 10.75 per cent. Inflation roaring at 9.4 per cent, highest in five years. Fuel costs increased by 6.5 per dent, at nine months high. Input costs of agriculture are rising. Food prices up by 8.22 per cent in March. Housing, water, electricity gas and other fuels up by 11.55 per cent. WPI up by 11.4 per cent. Large-scale manufacturing contracting. Drop in FDI despite CPEC. New investment is unlikely. Rising public debt beyond thresholds. 9.1 billion USD loans; from China ($4.2 billion), Saudi Arabia ($3 billion) and UAE ($2bn) plus an additional credit line of 3 billion USD from Saudi Arabia for fuel. Financing gap of nearly 20 billion USD predicted up to 2020. Economic growth prediction is 3.6% -3.9% (CPEC or not). Unemployment and BPL numbers set to increase. This is aggregated data from leading Pakistanis dailies.
Pakistan is in a long-lasting debt trap. IMF bailout between 5-9 billion USD is sought. Stopgap loans of 9 billion USD from China, UAE and Saudi Arabia have taken recently. CPEC outlay is between 45-62 billion USD. Macro and mini indicators are poor. If history is a guide, Pakistan can never repay anything. What happens ahead is truly a billion-dollar question.
FATF and Asia Pacific Group (APG) Listing
Pakistan is unlikely to get off FATF grey/blacklist. It is likely to be included in the APG greylist. If these bodies do not give Pakistan a good chit, FDI will reduce to worsen the situation. Even if it manages to get off the greylists by September, economic recovery will be slow. The USA will not rescue it as before. China will lend but not donate. IMF bailout will be highly conditional.
There are reports of a huge offshore oil find likely in Pakistani territorial waters. Will nature’s bounty solve Pakistani problems? Is this what China and Pakistan are gambling about? The missing jigsaw pieces. One must see. A mega oil find; if it does happen, will result in an oil glut to trigger a market fall. The Gulf will start going down affecting the Pakistani labour export! India’s oil bill will go down, pushing up its growth. It will still not alleviate Pakistani woes. In fact, new ones will come up.
If all fails, Pakistan might go back to the narcotics economy of yesteryears. In this context control over Afghanistan will be very important for Pakistan. There is a high likelihood of this happening and is worrisome.
Pakistan’s Kashmiri agenda is to wreak revenge on India. This will continue. The form will change. Expect maximization of indigenous militant and separatist content in Kashmir; one way or the other. Pakistan will shift the battle to the streets of Srinagar from a safe distance. There would be new methods hatched to make this happen. It is for India to anticipate the changed form factor and counter it. A lot of countering is political and internal to India.
A Shia Iran and a Sunni Pakistan will always be at odds with each other. Iran’s footprint will increase in Baluchistan and Afghanistan as Pakistan tries to do the same. As days go by, Chahbahar will start undercutting Gwadar and impinge upon CPEC as a slow bleed.
The oil markets will remain depressed as the world moves away from fossil fuels. The Gulf economies will start contracting. Resultantly, the labour export economy of Pakistan will shrink. Expect a backlash of unemployment and loss of revenue in Pakistan. At some time, the fatigue of supporting Pakistan endlessly will set in. Pakistan’s troubles are set to increase.
USA and China
Pakistan can not wish away the USA. Whether it likes it or not pre-eminence of the USA in the Indo-Pak context will continue. Most importantly the USA is leaving the region. In simple terms, it is going to let Pakistan stew in its own juices. China the replacement to the USA has limits on its abilities. It is going through its own problems. So far, the indication is that China will be highly selective in supporting Pakistan. China’s interests are always not best served by supporting Pakistan.
The Pakistani Trajectory
The general thinking is that once the USA exits Afghanistan, Pakistan will get back to the pre 9/11 days. That era is over. The thought that it is a frontline state is old fashioned and passé. Where is the front? As estimated, Pakistan has major internal issues with Baluchistan, Water, and CPEC (its third front). It has problems with all its neighbours. Afghanistan will be a quagmire. Its consuming anti-India sentiment will force it to continue head butting the latter. The larger external environment has turned unsupportive barring China and the Gulf. Based on historical evidence, the Army will remain over committed to power retention and conflict rather than peace, prosperity and growth. It will sustain conflict with its neighbours but avoid war. It will continue with nuclear blackmail of the international community to bail it out. A continued militaristic outlook implies economic degeneration which could lead to disintegration.
Never in its history has Pakistan been so precariously placed. Everyone knows that Pakistan must change course. Otherwise, it will be consumed by the Indus Curse. The international community cannot continue to be blackmailed. It knows that Pakistan must be defanged. The opportunity to do so is now. Pakistan needs IMF or it faces collapse. The Western community, if it has the stomach, should commence verifiable defanging of Pakistan before it is given a bailout. Much like what happened to Iraq. There is a model.
India must keep a watch. If the international community is unable to defang Pakistan, it will have to do its best to push the deep state over the economic abyss. That is the least cost option for India. The high-cost option is war.
LT GEN P R SHANKAR (Retd)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)
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