2016 was a year of mixed achievements. Though theoretically, Pakistan is an independent sovereign democratic state, practically it is tied everywhere with chains. The governance structure of the state is ineffective and manipulated whimsically. The degeneration from a developing to an underdeveloped country is proceeding at a very fast pace. This decline is not attributable to any inherent defects of national power and political economy. It is manmade and artificially articulated to neutralise the many inherent capabilities of Pakistan. This neutralisation is based on a premise of a weak and pliant country. Pakistan’s inherent capabilities are deliberately kept underdeveloped. Those that exist are being undermined or maligned in a manner that they do not matter. Pakistan is being strangulated by an apparently benign octopus with non-kinetic ferocity. This is what I called Pakistan’s Present and Future War way back in 2007. This hypothesis was framed by me in 2002 and has not changed since. The war has now entered its most destructive phase.

This series is an expose of how deliberate Pakistan’s meltdown is. In typical Kautilyan Strategy, the enemies have reached into the womb and are consuming us from within. The analysis leads to the conclusion that Pakistan is already a dependant state in most elements of policy. Economy, the engine that drives a state is now the biggest security threat followed by terrorism and non-performing democracy. The direct threat from India is way down the ladder.

The economic performance was explained ‘between the lines’ in the report of the State Bank of Pakistan. Tailored to look least critical and circumvent criticism from IMF, World Bank and analysts, the central bank pointed to some fundamental structural defects beginning FY2016-17. Though such projections may fool the public and parliamentarians, experts have identified the holes in the argument.

After the end of IMF programme in Pakistan, economic managers have suddenly started giving out unusual economic indices. This trend points towards a freewheeling policy with no checks from regulators and parliament. Trying to make sense of this berserk behaviour, it begins to dawn why the government wants to put all autonomous regulatory mechanisms under the ministries and why it is legislating new economic laws. The suspicion is that many things akin to the Protection of Economic Reforms Act 1992 are in the offing. To know how this Act facilitated money laundering and off shore businesses, read Panama the Marshy Trails (The Nation, November 12, 2016). The nightmare has just begun to unravel.

For instance, the report mentions an inflow of US$ 1.1 billion in FDI inflows from China. This lends credence to official claims that forex reserves are rising, growth increasing and fiscal deficits decreasing.  The government is making the nation believe that the economy is resurging, circular debts being contained and energy gap being reduced. We are being made to believe that the new round of investments from CPEC will change the fundamentals of Pakistan’s economy to an export powerhouse in the region. But this is far from true. This single indicator below exposes the hollowness of sustainable economic growth.

US$700 million from the $1.1 billion inflow from China is a commercial loan from a Chinese Bank at unknown interest rates to cater for purchase of Chinese plant equipment. It is commercial borrowing hidden in FDI. Pakistan at some stage will have to repay this and many other loans like this. One explanation given by critics for such fudging is the drying up of the Coalition Support Fund (CSF), a reimbursement arrangement with the US shown as remittances in the past. Pakistan’s exports and inward remittances have shown a decrease and not made up for the CSF loss. The international relief in oil prices has been squandered and not translated into improved indices like value addition and exports.  So to build an illusion of growth, the government has plugged the hole with CPEC. This means that rather than making CPEC a viable engine for development, the government is hell bent on mortgaging Pakistan’s future, at least to win the next elections.

What havoc such transactions will play with structural balances of Pakistan’s economy are anybody’s guess.  Already the IMF has warned Pakistan that if the government does not put in place a comprehensive strategy for reforms, investment, exports and growth such arrangement will create exorbitant debt liabilities. Unlike the five years plans of the past, no comprehensive plan exists. Economic management is on day-to-day basis through tight controls by the ministry of Finance. Economic development models never work like this. This is exactly what happened to Latin American countries during the Cold War and is happening to Africa now. It is also happening to Libya, Iraq and Syria.

Subtracting the incidental growth created by inflation and consumption, Pakistan’s actual growth is negative. FBR collection has shrunk. In fact it cannot even cater to debt liabilities. Agriculture sector, the quickest element of national growth is in negative and neglected. This has impacted exports that are mostly agricultural including value added products (textiles etc). These are also hit by the energy shortages. Large-scale manufacturing (LSM) is stagnant. From November 2015 to March 2016 LSM recorded a rising trend at 7.6%. By June 2016 it nosedived to zero. The past figures were fudged to please the IMF. Not a single economic index indicates any effort at sustainability. So it is easy for the government to indulge in tied aid, promote consumerism built on imports (tied trade) accumulate bilateral and multilateral loans, borrow commercially from international and national banks, floats bonds and use up all to pay back liabilities (debt trap), plug deficits and support expenses. The cycle goes on and on.

The government borrowed Rs 1079 billion (a turnaround of Rs 1314 billion including paying Rs. 235 billion) from the State Bank of Pakistan during the past six months. This is being dome to cater for budgetary deficits. Once the FDI loans, direct and indirect international and domestic borrowing is combined, it leads to the irresistible conclusion that Pakistan is being led into the black hole of a debt trap. The government is adding public debt at a rate of Rs 288 billion per month (liability of every Pakistani increasing by Rs. 14,400 per month). Thus the total liabilities of every Pakistani as part of per capita segment of the total loans are not in hundreds of thousand per head but in millions.

These are few but tangible indices indicators. Conspicuously missing is the reflection of the hyped fanfare of CPEC. Military’s efforts in constructing communication highways of CPEC and making Balochistan a peaceful are in full gear. But where is the five, ten or twenty year development plan that shall see Pakistan grow as a self reliant, export oriented power house of the region?

This single dissection reasserts my oft-repeated assessment that Pakistan is fast moving towards economic insolvency. The situation is beyond a dependency. Pakistan is moving very fast towards a ‘heavy in debt’, discredited, pliant and non-nuclear state.

Pakistanis have the right to be dreamers. But dreams cannot be substituted with delusions.


The writer is a retired officer of Pakistan Army and a political economist.