EDITORIAL: National Security Committee (NSC) chaired by Prime Minister Imran Khan and attended by civilian and military leadership approved the first-ever National Security Policy (NSP) 2022-26 after a detailed briefing by the Advisor to the Prime Minister on Security in which he rightly stipulated that its purpose was to ensure safety, security and dignity of Pakistani citizens and this citizen-centric approach requires economic security to be at the core.
Pakistan’s economy today remains a source of very serious concern reflected not only by the range of extremely harsh and politically challenging “prior” conditions set by the International Monetary Fund (IMF) midway into the 6 billion dollar Extended Fund Facility (EFF) programme but also by the reiteration of two disturbing elements prevalent in the economy today.
First, Pakistan’s requirement for the current year alone is to borrow 15 billion dollars from external sources (including multilaterals/bilaterals/commercial banks and from the international debt market through issuance of sukuk/Eurobonds). To put this amount in perspective it is relevant to note that during the five years (2013-18) of the PML-N government total foreign loans procured were of 30 billion dollars — a reliance that burdened the country with foreign loans on the flawed premise that loans procured from abroad were cheaper as the rate of interest was lower relative to domestic loans.
An increasing reliance on foreign debt, so argued the Prime Minister on 24 November 2021, “has become a national security issue”, adding that the government does not have enough resources to spend on public welfare. He then proceeded to bafflingly focus on the absence of tax culture as the reason for the country’s sustainability “being at stake”, expressing the hope that technology may increase revenue collection to 8 trillion rupees per annum.
This comment is baffling because notwithstanding the need for the government to remain proactively engaged in infusing a tax culture in the country by ensuring that income taxes, based on the ability to pay principle, take precedence over sales tax, an indirect tax whose incidence is greater on the poor than the rich, yet Imran Khan seems to have ignored what is within the purview of his government: slash expenditure.
While all the major recipients of budgeted allocations need to make a sacrifice voluntarily in the interest of national security, including civilian and military personnel, yet one would hope that the Prime Minister is aware that current expenditure has been increased by a trillion rupees in the current year budgeted outlay nearly doubled during his three-year plus tenure to date. In addition, the country no longer has the luxury of deferring reforms to the pension system (estimated at over a trillion rupees per annum) and all new entrants must begin to contribute to their pensions as in other countries of the world.
While government stalwarts are blaming the need to procure loans on the IMF mainly because in each quarterly review the Fund stipulates a roll-over of existing debt (over 14 billion dollars from China, Saudi Arabia and the UAE alone) which irrespective of our close ties no doubt compromises our security, however, there is also a need for the cabinet to take collective responsibility for not only signing off on the July 2019 EFF which envisioned foreign loans of 38.6 billion dollars during the 39-month programme period (ending September 2022) but also the February 2021 second to fifth review document that pledged raising taxes/withdrawal of exemptions, raising utility charges rather than improving performance while continuing to spend money that the country simply did not have through ever-rising reliance on borrowing.
The country’s dependency on foreign loans has made us heavily reliant on borrowing and our inability to diversify our productive base has made us dependent on international prices to determine our trade and current account deficits.
And secondly, a refrain much in use by senior cabinet members including Foreign Minister Shah Mehmood Qureshi has been to focus on economic diplomacy. Qureshi has constantly underscored the significance of ‘geo-economics’ in international politics maintaining that economic diplomacy is fast occupying centre stage in modern diplomacy while emphasising the need to diversify exports to expand Pakistan’s economic outreach. This is certainly true, however, much more work is clearly required to strengthen our ties with our erstwhile partners especially in the West and at the same time there is a need to deal with irritants in relations with friendly countries, including China, as reports that Pakistan is not releasing funds as per the contracts under the China Pakistan Economic Corridor are surfacing.
The then Soviet Union is a case in point that imploded due to economic infirmities and transitioned from being a superpower to one susceptible to sanctions which have severely impacted on its export revenue from oil and natural gas while China sacrificed a generation by meticulously adhering to a challenging economic strategy which has pitched it against the United States economic and military interests today. India’s increased clout in the international community, in spite of its human rights abuses, is also an outcome of its economic development. Thus economic and military strength are inextricably linked.
We hope that the government focuses on strengthening the economy through slashing its expenditure which will provide leverage in negotiations with the multilaterals, carefully weighs its actions/statements vis-a-vis relations with those countries that can assist us during the ongoing economic malaise, reorganise our security set-up and seek to promote a non-traditional export sector for example IT that is not reliant on import of raw material.
Copyright Business Recorder, 2021
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