The finance minister’s only remaining function is to get more loans to repay past ones

“Any finance minister of Pakistan has only one very simple task of how to get more loans to repay past loans. That is the only function of the country’s economy left. There will, of course, be long statements about revenue generation, development, industrialisation, education, health, etc. But these are all fairy tales because there is no money for anything. And nothing will happen,” said eminent economist Dr Kaiser Bengali during our recent seminar.

Speaking at a seminar — The State of Pakistan’s Economy: What Next? — organised by the Pakistan Institute of International Affairs (PIIA) here on Saturday, Dr Bengali said that the Pakistan he knew no longer exists. 

“The revenue your latest budget claims to collect will never be collected. And the items on which the expenditure has been allocated will never be spent because we don’t have the money,” he said. 

“The only thing that we need to do now in terms of managing the economy is how to get more loans to pay past loans. And since we will not get all loans to pay all our past loans, we will sell our assets. Everything is on sale here. We already have a banking sector that is 80 per cent foreign-owned, we have a telecom sector that is 100 per cent foreign-owned but more is to come.

Shabbar Zaidi calls for correcting NFC award, creation of new provinces, putting an end to smuggling from Iran, Afghanistan

“We have just announced the privatisation of a port terminal in Karachi, a Saudi team has visited all our airports and three major airports are about to be handed over to foreign interests. We use all kinds of terminologies to say we are not selling them we are just outsourcing them but basically it is handing over control of these assets. More and more will follow,” he pointed out. 

Dr Bengali said that two windows have closed here, perhaps permanently. “One is the economy window and the other is the security window,” he said. 

“Soon we will be employees of Chinese, Saudi, Emirati and other employers as Pakistan will be owned by them. We lost our economic sovereignty. It didn’t happen today. From 1993 onward for 16 years three State Bank governors came from outside Pakistan. They were employees of international organisations, they had not served in Pakistan for more than 10 years but now that we are burying our economic sovereignty in a more formal way, the economy window has closed. 

“The security window has also closed. The international geostrategic architecture has changed. For some 60 years of the last 75 years of Pakistan’s existence we cashed in on the Cold War between the United States and Soviet Union. Pakistan did all the dirty work for the Americans and got paid for it. But the United States does not need our services anymore. If the confrontation is with China, the Americans need Indian, not Pakistan. In fact, Pakistan is an irritant in the process,” he said, adding that the irritant has to be tamed and de-fanged. 

“And if we are defanged then of course there is no security role to play, no wars to fight. Then what will happen? The economic footprint of the military will increase. They are already into services and industry. That will increase. So we achieved independence from British colonialism and we are entering the phase of cantonment colonialism,” he concluded.

Adding to the economic gloom, former chairman of the Federal Board of Revenue Syed Shabbar Zaidi said that Pakistanis don’t even realise that they have ruined themselves. 

“We don’t even have the money for repayment of our foreign debts of US $130 billion as per schedule. Some 85 per cent of our bank’s debts are used by federal government loans, inflation is on the rise, there is subsidy on electricity of over Rs1,000 billion, the state’s own enterprise losses are over Rs1,000 billion, there are unfunded pensions to be paid, over 50 million children are not getting education and on top of all that we have the highest population growth in the world,” he reminded. 

His solutions to the economic problems included taking a strategic u-turn on the country’s location advantage and see China as our supplier and the USA as our buyer. 

He also asked for transparency on the China-Pakistan Economic Corridor, an end to smuggling from Afghanistan and Iran, correcting the National Finance Commission Award, enforcing Article 140A of the Constitution by empowering local government, revival of the ‘Planning Commission’ with a non-political chairman and creation of new provinces, at least 10 instead of just four.

While sharing his opinions on the issue of the economy of Pakistan, Assistant Professor of Social Development and Policy at the Habib University, Dr Aqdas Afzal said that the country’s decline began when it opened free trade. 

“But can we even do the trade? Do we even make anything exclusive that the world would want to buy from us? No one here talks about investment in human capital. We don’t have a skilled workforce and we opened free trade,” he pointed out, adding that other countries are now into strategic trade and value added trade.

“The United States only aims to compete with China. It makes whatever China cannot make,” he said while providing an example of strategic trade. “We should also identify winners and pick them to compete with the rest of the world,” he said. 

PIIA chairperson Dr Masuma Hasan also spoke.

Published in Dawn, 16 July 2023

Russia-Ukraine war and the future of European Politics

The European Union (EU), since its inception, has been the face of unity in International politics. As an exemplary model of alliance, in a world full of divided nations and militarised borders. The EU has proved time and time again that despite different outlooks, states can come together on combined and collective policymaking and action. This remained true following the Russian invasion of Ukraine  in early 2022, as the EU was quick to formulate its response and present Russia with a unified front. As the war continues, a look into the impacts of war shows rocky domestic politics within Europe. Despite being in its early stages, such cases tend to stick out like a sore thumb. The EU should stay vigilant lest Russia takes dissenting voices as a fallout between Europe.

It is a year and a half since Russian troops invaded Ukraine and started a full-fledged war, a war that was unforeseen at least by the majority of commentators, because since the end of the Second World War, Europe was not expecting to see another horrifying conflict within its territory. However, despite the unexpected nature of the war, hostility between Russia and Ukraine is not a new phenomenon. It dates back many years, with the annexation of Crimea in 2014 being one of the major events to take place as a result of this animosity. 

Today as Russia continues to show aggression, the world observes the deep-rooted issues that it leaves in its wake. The economic crisis following the onset of war has not only spread across Europe but also significantly impacted countries across the globe. Disrupted supply chains of gas and oil created an overall environment of economic insecurity among the European states. Europe that was once heavily dependent on Russian gas and oil has now had to cut back completely on Russian supplies, turning to other providers such as Qatar. Governments have also had to pay millions in subsidies, in order to protect the masses from hiked prices. 

Russia has also had to face a surge of individual sanctions since the war started, the numbers reaching around 13,840 since the invasion. These sanctions might have become a deterrent for Russia, however, that is not the case. One of the reasons could be attributed to the fact that over the years the country has made itself self-sufficient, hence no drastic effect. Subsequently, certain commentators believe that prolonged sanctions could lead to reduction in production capacity. This is due to the fact that there are export restrictions. Secondly, Putin does not seem bothered by the sanctions and has not expressed any desire for negotiations in order to lessen the sanctions. For Europe this is a matter of concern because the lack of apprehension from Russia shows that the war could go on for long. 

Apart from the economic crisis, the war has taken a toll on the political conditions of Europe as well. Although the European Union manages to get every member state on one page, in most instances, there are certain divisions between the states. Said divisions are now apparent in the response countries have towards Russia. Hungary and Slovakia have remained neutral opposing sanctions against Russia. Austria has also gone back to pre-war levels of gas imports. These are all indicative of the fact that these divisions could play a decisive role in the future politics of the EU.  

Since the war is a developing story, conclusive remarks cannot be made for the future of the EU, but that does not steer us clear from speculating that European politics could look notably different if the current divisions remain unaddressed. If looked at in detail this disunity predates the war, while some analysts have claimed that this disunity existed since the end of the Cold War, but was never dealt with in a coherent manner. Within the European Union, the member states have often preferred bilateral ties with Russia rather than a common EU approach. This is relevant today too since Central and Eastern European countries often do not see eye to eye with Western European states. 

Viktor Orban, the Hungarian Prime Minister, has made sure to leave no room for doubt when it comes to showing support for Russia. The invasion of Ukraine took place a few days before elections in Hungary and the Fidesz party has since then been very open and vocal about their alliance with Russia. As a result, Hungary stood isolated and at the brink of economic turmoil which resulted in increased narrative building against the EU. Similarly, Slovakia is nearing elections where a pro-Russia candidate is set to win, this could seriously derail the EU’s unified stance against Russia. 

This brings forth the next concern for European politics, which is an increase in right-wing populist sentiments. Although in most cases it is not reflected in the foreign policies of states and remains a domestic matter, one cannot completely disregard its existence. A rise in such sentiments today could mean something grave for European politics tomorrow. With politicians like Orban already in power and others like Robert Fico preparing to come into power, pro-kremlin foreign policy might become a dilemma for the European Union. 

In addition to this the right wing populist party in Austria, the Austrian Freedom Party (FPÖ), has been cautious in expressing its views on the Russian invasion so that it does not appear as an outright supporter of Russia. There is a sentiment too that the European policy towards Russia is not in everyone’s favour and that it was carried out without the consent of the people. As a result, The EU is blamed for the economic insecurity and deteriorating condition that Austrian people have to face. Keeping in mind that Austria has also gone back to importing Russian gas, the country remains on the radar for possible future alliance with the Kremlin. Such instances seem insignificant but could raise serious questions about the political state of Europe and the teetering face of unity that the EU presents. 

If not addressed and dealt with on time these states could potentially have a spillover effect on neighbouring countries, if that is the case Europe might have to deal with member countries not abiding by the values and principles of liberal democracies. Such fragmentation within Europe would not only be a matter of concern for other member countries but also a way forward for Russia. The Kremlin has previously used divisions within Europe to its own advantage. Had the annexation of Crimea in 2014 been addressed with proper rigour and force, Russia would have reconsidered invading Ukraine. It comes down to why Putin was able to plan a militarised invasion? Whether the EU was strong enough in its opposition or not? If Europe is not serious about the disunity, Russia would use that to its full advantage. This not only means that the current war would be prolonged but also that other avenues of disruption and conflict would be explored by Russia. 

Fatima Nawaz

Research Intern 

The Pakistan Institute of International Affairs (PIIA)