Independent foreign policy dependent upon economic stability

Foreign Minister Shah Mehmud Qureshi during his lecture on "Strategic Importance of Economic Diplomacy for Pakistan in the Twenty First Century" highlighted a home truth repeatedly articulated by the founding Editor of Business Recorder the late M A Zuberi in these columns: there can be no independent foreign policy in the absence of economic stability as economic infirmities constitute a serious affront to the sovereignty of an independent country. While Qureshi limited his lecture's focus on the current economic situation by stating that "as we are passing through a difficult economic situation the government is putting all its efforts to get economic stability," we have time and again drawn the attention of the decision-makers to highlight the profligacy that began soon after independence, and sadly continues to this day, as we witnessed administration after administration relying on ever-rising external borrowing to meet rising current, non-development expenditures; and in spite of the 23 International Monetary Fund (IMF) programmes that this country has been on, no Pakistani government has implemented the structural benchmarks associated with IMF programme support that would have improved governance of our productive and non-productive sectors, thereby mitigating the need to borrow more in future.

It is a fact that the current administration inherited a heavily indebted economy in 2018, with a current account deficit at a historic high of 18 billion dollars, prompting Prime Minister Khan and Chief of Army Staff Gen Bajwa to make quick forays into approaching 'friendly countries' to get concessional borrowing from them with what are by now obvious implications on our ability to follow an independent foreign policy. Economists also point out with a degree of veracity that the friendly countries in return also sought special treatment in terms of their proposed investment, private or state-owned, which in some instances does not adequately reflect what should have been the government of the day's priorities. Disturbingly, these loans did not forestall the country going on an IMF programme whose harsh prior actions and upfront conditionalities have left the people reeling from rising inflation and growing unemployment.

In marked contrast, successive governments in India focused on adhering to a development plan that initially envisaged a relatively closed economy defined as one where imports, especially of luxury items; were banned or severely discouraged through a strict licensing regime combined with prohibitive import duties and levies and where the public had little option but to purchase low quality domestic products thereby supporting domestic industry. During the early years after independence, the Indian government took advantage of its special relationship with the then Soviet Union and succeeded in purchasing oil payable in rupees as well as exporting a lot of its products, particularly jute manufactures, tea, cotton, textiles, unmanufactured tobacco, vegetable oil seeds, to the Soviet Union which re-exported them on highly subsidised rates to the Eastern bloc satellite states.

Today, the Indian economy is extremely strong with large foreign exchange reserves that have enabled an ultra-right Modi to dictate to world powers to acquiesce to his policies of internal repression. Developed Western countries including the US, Europe, Japan are exhibiting a singular lack of interest in gross human rights violations by BJP government because of expanding size of Indian market. The world community must not lose sight of the fact that Malaysia's recent support for the Kashmir cause prompted the Indian business community, no doubt backed by their government, to declare that it would no longer import palm oil from that country. Although the heir apparent of Dr Mahathir Muhamad, Anwar Ibrahim has clarified that the Prime Minister's comments may reflect some people's sentiments on the Kashmir issue, India's economic belligerence against this important Islamic country which has a sizeable Hindu population, continues.

Insofar as Pakistan is concerned, there appears to be now an escalation in reliance on foreign borrowing rather than scaling it down and this cannot all be placed on the shoulders of the previous administration. The budget for the current financial year does not envisage any reduction in current expenditure (raised by 30 percent) which cannot be laid at the doorstep of the rise in Ehsaas programme given that the Kafaalat programme, renamed from Benazir Income Support Programme, constitutes 120 billion rupees allocation, same as last year, while additional allocation is only 70 billion rupees that constitutes less than 4 percent of the raise under this head. Additionally, the projected rise in tax revenue was widely regarded as unrealistic, a claim proved accurate with the widening gap between target revenue and its realization. More significant austerity measures need to be taken and governance in power and tax sectors needs improvement as the present government, like its predecessors, continues to pass on the buck for its inefficiencies onto consumers/taxpayers.