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

Crisis in Sri Lanka: Lessons for Pakistan

Expert says political elite of Sri Lanka failed to reach consensus on how to run their country. Pakistan is not going to default on international loans, moot told

The Pakistan Institute of International Affairs (PIIA) organised a seminar on ‘Crisis in Sri Lanka: Lessons for Pakistan’ on Saturday. Introducing the subject, the PIIA chairperson Dr Masuma Hasan explained Sri Lanka is going through an economic crisis, which is said to be the worst crisis in the history of the country.

“There are food shortages, people are protesting. So there is both a humanitarian and political crisis. A couple of days ago, the Sri Lankan prime minister said that their economy has totally collapsed. They defaulted on their international loans,” she said, and added: “We decided to call this seminar because many here in Pakistan think that this country will follow the same pattern as Sri Lanka.” Dr S. Akbar Zaidi, the executive director of the Institute of Business Administration (IBA), Karachi, said he does not think that Pakistan was going to default on its loans. He said:

It’s highly improbable that we will … Right now the countries that have defaulted post-pandemic are Lebanon, Zambia and Sri Lanka. But here Pakistan is in an International Monetary Fund [IMF] programme, which Sri Lanka was not.

He further elaborated that Sri Lanka was a richer country than Pakistan, stating:

Poorer countries are given loans at a lower rate, but Sri Lanka was given loans on a higher rate … Still, default is not the end of the world, but it makes life very difficult as it gives way to unemployment and inflation and we are already there.

Dr Farhan Hanif Siddiqi, director and associate professor at the School of Politics and International Relations, Quaid-i-Azam University, Islamabad, said that the political system in Sri Lanka combined with ethnic and cultural issues caused a vicious cycle there. 

He also said that the political elite of Sri Lanka failed to reach consensus on how to do politics or how to run the country, which is also a big contributory factor in what is happening in Sri Lanka today.

“In 2015, their presidential system was changed into a parliamentary system. Then in 2020, they were back to the presidential system. Now, again they are calling for a parliamentary system. It does not go well with that nation,” he said.

“Even though the Tamil Tigers were defeated, the Tamil minority in Sri Lanka is an underlying problem. A younger generation might even mobilise themselves in the future. And when politics does not address the underlying conflicts, then they grow. We are facing a similar issue in our Balochistan,” he said.

Dr Jehan Perera, executive director of the National Peace Council of Sri Lanka, joined in through a video link to provide a better picture of what is going on in his country at the moment.

He said that just four years ago, Sri Lanka was called a middle-income country by the World Bank. Sri Lanka was also a great tourism destination. “But in the last three months, the value of Sri Lankan currency has fallen by 100 per cent. Now 70 per cent of our population eats less. Now, Sri Lanka is known as the seventh-most malnourished country in the world. It is being compared to Somalia.”

“In Colombo, we see enormous lines or queues for petrol and diesel at the pumps. People park their cars there for two days and more, and go home because there will be no fuel until there is supply. There is no gas to cook food. We do it on electric hot plates. The universities have been closed. Education has been shifted to online. There is a shortage of medicine even and we are thankful to Pakistan for sending us medicines. And the immediate blame for all that is happening in Sri Lanka has fallen on the current government. The people are angry. They feel terribly betrayed. They think that the country cannot import petrol, diesel, gas and medicine because it has run out of dollars. On May 9, there were riots where the people attacked the homes of ministers. It led to the resignation of the president, who was portraying himself as the king,” he said.

“The majority principal is entrenched in Sri Lanka, but we also have other groups such as the Sri Lankan Tamils and the Tamils who came here from India many years ago. They all speak Tamil, but the country’s language is Sinhala. When decisions are taken, the Sinhalese do not take the minorities into consideration. The Tamil language is spoken by three of the four communities in Sri Lanka, but the parliament made Sinhala our national language, which has also led to a sense of insecurity among the minorities. So many minorities in Sri Lanka also feel powerless as our army, too, is 95 per cent Sinhalese,” he explained.

Published in Dawn, 26 June 2022

Experts discuss post-Covid world order

Advocate Hina Jilani terms coronavirus pandemic a human rights crisis

The Pakistan Institute of International Affairs (PIIA) on Saturday held a webinar on ‘Post Covid-19 World Order: Challenges and Strategies’. Human rights activist and lawyer Hina Jilani said with regard to the Covid-19 crisis there’s so much to lament but also so much to reflect upon. It isn’t just a health crisis; it’s a human rights crisis. It’s also an opportunity to correct what we have neglected in the past. The foremost aspect of the situation is that how weak the world is, developed or underdeveloped — employment opportunities have been affected, the right to work has been affected, there have been increased prices (of commodities) etc in the early days of lockdown, it was a matter of survival for many. The issue that arose was how to survive physically. But social isolation affected us badly because the support systems we usually turn to were not available.

Ms Jilani said the crisis has a global dimension because the multilateral system did not respond the way it ought to have, indicating that the system is weak. Agreeing with an earlier speaker, she remarked it was the fragmentation of the multilateral world that impacted the response to the situation. She hoped that it (time to come) will not be the new normal and we will emerge with a better understanding of how to readjust our priorities. “We need to make sure that we give attention to the marginalised and vulnerable segments of society. There has to be a global response to the crisis and there’s a need to recognise that there are more stakeholders who need attention not just the victims [of illness] and government. One of the least recognised sectors that have stepped up in the situation is civil society.”

‘Fundamental uncertainty’: Keynesian economics and COVID-19

With the colossal scale of the crises looming over the global economy, perhaps now is as crucial a time as ever to revisit the Keynesian notion of ‘fundamental uncertainty’

‘By uncertain knowledge,’ wrote John Maynard Keynes in 1921, ‘I do not mean merely to distinguish what is known for certain from what is only probable…There is no scientific basis to form any calculable probability whatsoever. We simply do not know.’ Upon reading these words (written in the middle of the worst influenza pandemic in history, the Spanish Influenza!) in our contemporary setting, there is a pertinent case to be made that the global crisis that is taking the world by a storm necessitates a re-examination of Keynes’ foundational concept of ‘fundamental uncertainty.’ Following the outbreak of the COVID-19 pandemic and its mammoth economic consequences for the global economy, a string of crises erupted that have not only rattled the foundational basis of the incumbent liberal world order but is, according to professor of economics Timofey V. Bordachev, ‘living its last days.’ Alain de Benoist describes the pandemic as a ‘catalyst’ with regard to the decline and disintegration of this liberal world order, arguing that this new economic and social crisis could give rise to a new financial crisis, one that ‘has been expected for years.’ 

Of all the unprecedented financial blows of 2020, the news concerning the extraordinary decline in global economic activity leading to the United States’ oil prices falling below a jaw-dropping $0 for the first time in history is set to be one of the most unprecedented by-products of this pandemic. Termed one of the most debilitating quarters for oil prices in the history of the ‘oil revolution,’ this recent development comes in the midst of the oil-price ‘war’ initiated by Saudi Arabia against Russia in early March. A sharp decline in factory output and transportation demands following the early stages of the 2019-2020 COVID-19 pandemic precipitated a decrease in oil demands, leading oil prices to plummet.

Dr Bengali: Pakistan needs to take back its economic sovereignty

“Pakistan is facing a major economic crisis for which we need to take urgent steps. But first we need to take our economic sovereignty back,” said economist Dr Kaiser Bengali, while proposing to ban all non-essential consumer imports in order to promote local industry. He was speaking at an interactive session on ‘Contemporary Economic and Security Issues in Pakistan’ at the library of The Pakistan Institute of Inter­national Affairs on 5 December 2019. “Pakistan has a lot of internal pressures that are resisting adopting the demands that FATF [Financial Action Task Force] is making. Over the past 40 years, we have created vested interests in this country that think that they are above the law. This is across the board. Today’s news is very interesting. Malik Riaz’s assets of 190 million pounds have been seized. Before that the Supreme Court of Pakistan had said that he would be paying Rs460 billion to the state (watch video and view photographs). 

Whether he would have paid this or not is another matter. What’s significant is that his assets were seized by the UK’s National Crime Agency. “And here we have to ask, why is it that Pakistani criminals are always convicted abroad? Why aren’t they ever convicted here? Many decades ago, there was this Pakistani actor who spent five years in a London jail for drugs smuggling. We never caught him here. Similarly, there were some two or three Pakistani cricketers who also did time in UK jails for spot fixing. We didn’t catch them. In 2005’s earthquake there was this building which collapsed in Islamabad, and its owner is comfortably sitting abroad, not convicted. The owners of the Baldia factory, in which 289 workers burnt to death, are also sitting in Dubai. We have created a criminalised state. We don’t catch our criminals,” said Dr Bengali.

Reko Diq: Pakistan versus Gold Diggers

These narratives show how foreign investors are a double-edged sword for Pakistan. TCC was suspected of lending support to Baloch separatists. 

Pakistan has recently been garnering a lot of attention in international tribunals. A recent case is the Reko Diq case, which led to arbitration in the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). In Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan (ICSID Case No. ARB/12/1), ICSID has ruled that Pakistan has to pay a $5.8 billion penalty to a mining company, the Tethyan Copper Company (TCC). It is an oddity that the Pakistani public has been disabled from knowing the full details of the ICSID arbitration judgment. The condition for the publication of the award is that both parties must consent to its publication and apparently there is no consensus that it should be published, or alternatively there is consensus that it should not be published. Either way that is rather opaque and lacks transparency. Yet we do know the identities of the arbitrators and the costly law firms employed by the parties and all the procedural steps in the arbitration (which is rather pointless indeed without knowing the full and exact details of the final arbitration award). 

It is rather appalling that the award is not in the public domain and the people of Pakistan are being denied access to the full details of the decision. Reko Diq is a region in Balochistan that has large gold and copper reserves. TCC acquired an exploration license in 2006, buying it from the company BHP Minerals. Though this seems a very recent mining project, TCC itself is a joint venture by other foreign companies, and BHP had been granted licenses since 1993 by the Balochistan Development Authority (BDA) under the Chagai Hills Exploration Joint Venture Agreement (Chevja). Now that TCC was exploring Reko Diq’s reserves, it completed its feasibility study in 2010, and applied for a mining lease, but it was denied. Chevja had been challenged by petitioners before. In 2013, the Supreme Court decided that the agreement (Chevja) was void ab initio. In 2009, the provincial government had already terminated Chevja.

India’s tit-for-tat policy in its trade war with the United States: A master stroke or miscalculation?

India has long had a field day putting tariffs on American products. No longer acceptable!

Because the G-20 failed to restore the international trade order, on 9 July 2019 American President Donald Trump fired off yet another Twitter attack. This tweet from the US President was posted after a few days of the G-20 Summit, when he met Indian Prime Minister Narendra Modi at the sidelines of the G-20 Summit late last month, where the two leaders agreed upon further meetings to resolve the escalating matter of trade disputes which included import quotas on agricultural goods and to put price caps on medical devices. The other hindering topics included:  outsourcing of intellectual property protections on generic drugs. Moreover, ever since taking office, President Trump has focused on reducing bilateral trade deficits to reduce national security impact of steel and aluminum imports, however, a deadlock was avoided up until the recent but significant change in Prime Minister Modi’s approach after getting elected for a second term.

The decision to revoke India’s status for special trade treatment and the slap back tariffs by India on US goods and services has quickly led Washington and New Delhi towards an impasse. The desire 0f the Modi  government to please domestic constituencies has further aggravated the situation to a tit-for-tat stand-off and India has escalated a trade battle by slapping new tariffs on American goods, a battle that was never worth fighting and may now indeed backfire. Furthermore, India had announced retaliatory tariffs back in June last year, but they were recently implemented. The 120% tariffs on US goods and services are limited in nature and largely symbolic but show a shift from restrain to a tit-for-tat policy by India. Modi government’s shift backward on market openness, with increasing tariffs on a few dozen goods, new regulations on e-commerce and a push for data localization in its growing digital economy is what has upset the Trump administration.

Qatar and the Global Energy Market: The Politics of Natural Gas

Pakistan’s position in this dilemma is unique; it enjoys ties with Qatar, as well as with Saudi Arabia and the United Arab Emirates.

On 22 June 2019, Emir of Qatar Sheikh Tamim bin Hamad Al-Thani arrived in Pakistan on the invitation of Prime Minister Imran Khan for a two-day state visit. The state visit was specifically aimed at strengthening bilateral ties and improving cooperation in diverse fields between Qatar and Pakistan. In addition to the one-on-one talks between the Emir, Prime Minister Imran Khan and President Arif Alvi respectively, delegation-level meetings were also conducted between representatives of both countries. Notably, one of the most important results of this visit was the subsequent pledge for mutual cooperation with regard to gas exploration and the energy sector. The sheer competitiveness of the energy market is a stark reality. In a bid to secure a pivotal multi-billion-dollar supply contract, the Qataris reduced prices of liquefied natural gas (LNG) for Pakistan in May 2019.

With Saudi Arabia and the United Arab Emirates both offering enticing offers concerning deferred oil and LNG payments for Pakistan, Qatar sought to modify LNG prices in order to successfully secure the deal. It is reported that presently, Qatar exports ‘500 mmcfd [million cubic feet per day] to Pakistan under a 15-year agreement struck at 13.37% of Brent crude price.’[i] Pakistan has been negotiating with a number of countries including Russia, Turkey, Malaysia, Azerbaijan and Italy with regard to attaining long-term gas deals. Saudi Arabia (and state-owned petroleum and natural gas company Aramco) has also shown interest in securing a gas deal with Pakistan.

Is Venezuela No More?

One should not be wonderstruck if many Venezuelans crave to live elsewhere because the economic, political, and overall human rights situation in Venezuela is nothing short of a disaster. What used to be a robust economy not more than a decade ago, has slipped into grave peril inasmuch food has become a source of conflict among the poor families, and women are selling their ‘hairs’ in order to satisfy their families’ appetite. Indeed, the basic provisions, such as toothpaste, milk, or bread, which we all take for granted are what Venezuelans yearn for and beg for. Many people are spending hours just to try to find something to eat from the ‘food waste’. In its heyday, given the colossal oil reserves, Venezuela had reaped a lot of benefits and was able to export 100,000 barrels of oil, per day to Cuba only. Due to relying specifically and excessively on oil, the latter accounted for 95 per cent of the Venezuela’s export.

Hugo Chavez, the former president, with a desire to make the most out of the country’s oil production, sweepingly nationalized the private companies which as an attempt went into a tailspin after the oil prices started to tumble. Hence, the corruption and mismanagement became rampant and the hyperinflation inevitably followed. Worst, all the money was spent, and no money for further production was left. Now the situation at its best is chaotic, and some say, at its worst, worse than the great depression of the United Sates. However, the experience of this economic downfall in practice is more frightening. A cup of tea costs 7000,000 bolivars in Venezuela and people prefer to exchange goods instead of paying or receiving cash. Since this crippling economy and the grave humanitarian crisis are the upshot of political dysfunction and mismanagement of the institutions, many experts believe it is ‘socialism’ at its end in Venezuela.

Why Brexit is a vicious cycle

According to Ken Clarke, the Father of the House of Commons, “The ordinary rules of conventional politics cannot be applied to the last two-and-a-half, three years of Brexit politics.”

Winston Churchill, the legendary prime minister of the UK, took the view that every time we have to decide between Europe and open sea, it is always the open sea. The repercussions of such thoughts never dawned upon him but now it seems that the chickens have finally come home to roost with only 20 days remaining until Brexit day. The clock is ticking. The idea of Brexit, which is in fact driven by a hatred of foreigners and a false sense of superiority among the racist natives of England, is a vicious cycle. Be it a deal or no-deal, to compensate for the losses will be Gordian knot for the UK government but Theresa May is adamant that the UK can walk the walk without a deal despite the fact that Parliament is opposed to the UK crashing out of the EU. One should have an idea of the events in the decades which led to Brexit. Prior to its entry to the European Community in 1972, in the 1960s majority of the people in Britain had manual jobs and not more than one-tenth of the voters took university education.

But, in the 21^st century a large number of people in the working class plummeted by becoming financially better off and majority of those people became a part of middle class citizens. Notably, overtime more than 30 percent of the electorates possessed university degrees from the middle class. Overall, this changed the demography of the Conservative and Labour party. The Labour Party always won elections in the past due to constant support of working class. Since 1997 Tony Blair had a centre approach (a third way) and he did not take seriously the fact that working class was responsible for always bringing his party into power. Those people had issues which could have been sorted out by either Tony Blair or David Cameron. But the working class was stranded by both and divisive liars like Nigel Farage took the opportunity to divide the UK and stir up mass racism against immigrants from Europe who can enter the UK without limits because of the magical law of free movement in Europe.