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Protecting the sovereignty of Pakistan

Gone are the days when countries were conquered by the armies, now superpowers make the smaller countries subservient by getting control over their economies. They (superpowers) either initiate internal turmoil in the name of the change of regime or enforce ‘The New World Order’ by imposing their economic agenda. In this endeavor the multilateral lenders play the most important role. While International Monetary Fund (IMF) has been classified as the lender of last resort, it attaches conditions that plunge the borrowing countries deeper into the financial problems. Pakistan is one of the perfect case studies of borrowing for the sake of paying off the debt acquired in the past.

During the cold war era, Pakistan was ‘Darling of the US and its allies’. One of Pakistan’s air base was used by the US for spying USSR. Pakistan played a key role in taking the then Secretary of State, Hennery Kissinger to Peking secretly. Pakistan was also made part of various US-led treaties, but no support was extended under these treaties when India attacked West Pakistan in 1965 and infiltrated into East Pakistan in early seventies leading to the creation of Bangladesh. Pakistan is fighting a US-proxy war in Afghanistan for more than four decades in return, it is receiving paltry payments, which help in avoiding default on payment of its external liabilities, at the best. The extension of loans by the multilateral lenders and their technical support has not helped Pakistan in standing on its own feet.

In the post 9/11 US policy towards Afghanistan, may have made Pakistan ‘Frontline US-Partner in ‘War Against Terrorism’ but what it (Pakistan) has received in return? Pakistan’s social and economic fabric has been completely destroyed; its land has become ‘safe sanctuaries’ for the foreign militants and the US mantra ‘do more’ persists. Pakistan gets dismal payment for proving logistic support to the NATO troops. The trawlers carrying heavy military equipment through Pakistan have virtually turned the highways into backyard streets. While Pakistan is being made part of Turkmenistan-Afghanistan-Pakistan- India (TAPI) gas pipeline, it is not allowed to complete Iran-Pakistan-India (IPI) gas pipeline. It was expected that after the withdrawal of the economic sanctions on Iran, work on IPI would be accelerated, but virtually no progress has been made to date.

China-Pakistan Economic Corridor (CPEC) also faces serious threats. Baloch rebel groups (getting support from outside) often blow up gas pipelines, electricity poles and railway tracks to pass on the message to the foreign investors that Pakistan is not a safe destination for investment. Similarly, India is opposing the construction of infrastructure under CPEC in Azad & Jammu Kashmir, terming it Pakistan occupied Kashmir. On top of all slogans like ‘Grater Balochistan’, ‘Sindhu Desh’ and ‘Pakhtunistan’ are raised with regular intervals to weaken Pakistan. All these slogans have been coined and supported by those who are perfectly aware of the geopolitical importance of Pakistan.

To understand how adversely the conditions of multilateral lenders and the IMF hurts Pakistan, review of just three policy shifts explains the hidden agenda These are: 1) refusal to lend money to WAPDA for the construction of mega water storage facilities/hydro power plants, 2) facilitation to the private sector to construct independent power plants (IPPs) and the restriction on the public sector for the creation of additional power facilities and 3) pressure on Pakistan to gradually withdraw the payment of all types of subsidies. Let us examine the adverse impact of each of these policies.

Restriction on lending to WAPDA to construct water storage facilities/hydro power plants is a double-edged sword. On one hand it deprives the country from construction of water storage facilities that creates havoc during monsoon. The water goes straight to sea inundating the adjoining areas and causing huge economic losses to the country. In case downpour is low, the country also faces drought-like situation. On top of all the country is deprived of low cost electricity. The cost of power generation at thermal power plants comes to more than Rs10/unit (depending on the international prices of crude oil), where the cost of generation of hydro plants is less than one rupee. It is true that huge capital investment has to be made in transmission and distribution cost, but that is one time.

Along with restriction on lending to WAPDA, multilateral lenders put pressure on the Government of Pakistan (GoP) to allow creation of independent power plants. This shifted generation to the private sector that enjoys iron-clad agreements, but loss making distribution entities still remain with the public sector. This policy puts the cart before the horse. All the successive governments have been facing the circular debt issue and pay over Rs500 million towards its settlement every year, but the phantom continues to live.

All the developed countries pay the subsidy on different products and services to protect the interest of financially weak segments of the society. The US, despite the most developed country, pays the highest subsidy to the farmers. However, when it comes to payment of subsidy on electricity and fertilizers to small consumers by Pakistan, the policy parameters completely change.

The prevailing situation can be attributed to the inability of the successive governments to overcome: 1) budget deficit, 2) trade deficit and 3) confidence deficit. All the governments have failed miserably because they could not come up with ‘any home grown plan’ but have been following the IMF dictate blindly. Therefore, if Pakistan has to achieve the real sovereignty, it has to achieve the capacity to prepare its own financial policies and implement those.

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