The obtaining of a relief package from Saudi Arabia has caused triumphant crowing from Imran Khan’s PTI government, as well as caused hopes to rise that there will also be an aid package from China, which the latter will announce when the PM goes there next week. However, neither the Saudi package nor the Chinese will be a substitute for the IMF package, which it has been predicted the government will have to opt, from the very day it was elected.
Some things need to be remembered at this point. First, the IMF is a tool of US foreign policy. Its loans are only given if countries are willing to follow US instructions. This is particularly relevant when a state, like Pakistan, approaches it. Second, while Pakistan and Saudi Arabia have historic and deep ties both because of religion and because of migrant workers, Saudi foreign policy is subservient to American, particularly at the present moment, because Crown Prince Muhammad bin Salman thinks he needs US support in the dynastic battle likely to ensue when his father King Salman passes away, and he tries to succeed him. In this context, Pakistan’s release of Taliban commander Abdul Ghani Birader must be seen as an attempt to appease the USA, rather than a desire to facilitate Taliban participation in peace talks. It is worth remembering at this point that the Pakistani military has jealously guarded Afghan policy as an exclusive preserve, and this occurrence under a government which is beholden to the military assumes a significance of its own.
There was at least one other episode when the USA wanted to help Pakistan even though it was under sanctions, back in the 1990s. An example was the supply to the Pakistan Navy of British ships when the USA took back its vessels. If the USA cannot keep Pakistan afloat itself, it sees that its allies do. That means that Saudi help to Pakistan has tacit US approval.
Perhaps one consequence of the Saudi package is to be seen in the silence of the government about the Khashoggi affair. Pakistan has not even echoed US President Donald Trump’s criticism of the latest Saudi statement as a poor cover-up. It is also perhaps true that the Pakistan government does not face anywhere near as much pressure as the Trump Administration over the allegations of the complicity of Crown Prince Muhammad bin Salman. With the Saudi admission that Khashoggi was killed inside the Saudi consulate in Istanbul, another question that warrants answer is the dead body of the slain journalist.
It is not just the Saudis that Pakistan wants to sidestep. There is a strong current of opinion that there is no way that Saudi Arabia would act against a US resident, and contributor to a US newspaper, without a US go-ahead, no matter how trenchant a critic he was of the Crown Prince. Additionally, the story of Khashoggi being killed in a brawl with diplomats has echoes of Dr Afia Siddiqui wounding a US soldier with his weapon during a fight in an Afghan prison. Not only did it give the go-ahead, the USA probably advised the cover story.
Imran’s claim that he had promised mediation with Iran over Yemen sounded as if Pakistan was finally getting into the Middle East, at last, something it had carefully avoided so far. Kh Asif, the Foreign Minister in the previous government, disclosed that Pakistan had resisted the pressure to lend even a token presence in the Saudi invasion of Yemen, itself part of the greater Saudi-Iranian rivalry. Pakistan’s problem is that while it has a Sunni majority which is vulnerable to Saudi efforts to propagate its Ahle Hadith brand of Islam, it also has a significant Shia minority, which would be very upset by any attempt to suppress Iran. Unfortunately for Pakistan, that is, precisely, what the USA is presently trying to do, starting with its withdrawal from the Iranian nuclear deal.
The Saudi involvement in the Yemen crisis has also precipitated the world’s worst humanitarian crisis, another topic on which the Pakistani government is maintaining a stubborn silence. It may be Pakistan’s turn to come up to the bat for a US ally. It has already done so by having the PM represent Pakistan at the investor’s conference touted as ‘Davos in the desert’, which saw a host of cancellations, including by the US Treasury Secretary and the IMF Managing Director, because of the Khashoggi affair.
Another dimension is that of the involvement of China. The Trump Administration has expressed the fear that Pakistan will use any IMF bailout to pay off the debt owed to China for China-Pakistan Economic Corridor projects. The Trump Administration has taken the USA into a trade war with China, which is hurting not just both countries but the whole world. Pakistan finds itself in the crossfire and being forced to choose sides. That it has no wish to do, but unless China comes up with the money it needs to go on importing, it will have to fall in with the USA’s political requirements.
Within this context, Pakistan also has to weigh the fact that the USA is growing closer to India, and is ensuring that this happens at the expense of Pakistan. Another essential factor is military: Chinese technology is not as advanced as the USA’s, but what it has is freely available to Pakistan. On the other hand, US weapons systems are only made available to Pakistan if it pays the political cost demanded. This factor is all the more important for a government that is supported by the military.
Though it is highly unlikely that China would be as eager as Saudi Arabia to bail out Pakistan to please the USA, it would weigh with China what is the US reaction to this. It might not determine whether or not there is a relief package, but it will undoubtedly assess its size.
However, Pakistan continues to prepare for a new approach to the IMF. Pakistan has low credibility, and thus instead of having conditionalities imposed, it will have those conditionalities in place already. This will allow it to claim that the package is home-grown and that the IMF granted its package because it was impressed by the measures the government had already taken, rather than because of any conditions it might have set.
Another factor that needs factoring in is the effect of the relief packages on any IMF package. The Saudi package alone has meant that any IMF package could be smaller than that originally envisaged. A Chinese package would not only further shrink the IMF package but also serve to assuage Trump Administration fears about the diversion of US taxpayers’ money (which is what most of the IMF’s funds are) to paying off Chinese creditors of Pakistan. That Saudi Arabia is investing in a refinery in Gwadar reflects Saudi is exporting so much oil to China: it has already put up refineries in China itself.
However, in this case, the devil is not so much in the detail, as beyond it. The real conditions are not so much economic as political. This might be seen in the Financial Action Task Force grey-listing of Pakistan, where Pakistan is expected to take certain political decisions, even though the field is purely economic. However, it also needs to be seen what the Saudi and Chinese political conditions for providing financial relief are. After all, neither country is helping Pakistan out of goodness, or because it is a good investment, and Pakistan has made an appeal to its political friendship.
It also remains to be seen what the economic costs of this relief are. The IMF is supposed to extract a cost that yields standard banking profits. If either China or Saudi Arabia or both try to obtain higher profits, that would be because they would take a poor view of Pakistan’s ability to pay.
The writer is a veteran journalist and founding member as well as executive editor of The Nation
maniazi@nation.com.pk