Initially, Imran Khan had indicated that his inauguration as Pakistan’s Prime Minister would be celebrated like a South Asian wedding. But, on reflection, he says that he would like an austere ceremony. International guests are not to be at the forefront. ‘It will be a completely national event’, said Pakistan Tehreek-i-Insaf spokesperson Fawad Chaudhry.
It is a good idea not to invite too many world leaders. Where would they be seated? Who would get pride of place – the President of the United States or the President of the People’s Republic of China? Where would the head of the IMF sit and the head of the Asian Development Bank? What about India’s Narendra Modi and Afghanistan’s Ashraf Ghani? Times are too tense, with Pakistan’s debt service payments expected to rise to $45 billion and with an IMF loan in the offing.
Indeed, there are indications from the new government that it would go to the IMF for its 13thbailout. The amounts wary, but the loan would have to be between $10 billion and $12 billion. The last bailout from the IMF was in 2013, when Pakistan borrowed $6.6 billion.
Peril appeared in July, when the State Bank of Pakistan revealed that its reserves were down to $9 billion, not enough money to cover imports over the next two months. China had loaned Pakistan $5 billion last year. Beijing is on standby to lend Pakistan more money.
Pakistan is a key part of China’s Belt and Road Initiative, a massive infrastructure project that spans the entire length of the southern part of Asia – from south China to Turkey. China has developed this Initiative for three reasons:
- To find a way around the Straits of Malacca, a key passageway for energy and other raw materials supplies to China and for Chinese goods to markets. These waters are now deeply contentious, with US military ships patrolling them alongside the navies of India and Singapore. If these Straits are closed, the Chinese project will seize. The Pakistani port of Gwadar and the roads and railway lines that link it to China are part of this attempt to circumvent the Straits of Malacca.
- To develop western China, a major internal market for Chinese investment that had been neglected in previous decades. Most of China’s recent development has taken place on the Pacific Rim, while the regions in the west have received little of the kind of buoyancy seen on the coastline. In 1999, at the 9thNational People’s Congress, the ‘Go West’ strategy was unveiled. Since 2000, the Chinese government has spent close to $1 trillion in the twelve western provincial divisions, which house 400 million people. The Belt and Road Initiative is part of this process, but so is the Yangtze River Economic Belt. The roads and rail to Pakistan are crucial to this ‘Go West’ project.
- To cement alliances with countries such as Pakistan and to seek mechanisms – through the Shanghai Cooperation Organisation or SCO (which both India and Pakistan joined last year) – to create stability and peace in the region. Afghanistan has long been a problem for the Chinese ‘Go West’ project. The SCO was created in 2001 to draw in regional partners in Central Asia to find a solution to the political instability in Afghanistan. This remains a central aspect of the SCO’s work. China is keen that Imran Khan’s new government will be able to find a way to bring the parties in Afghanistan to the table. There can be no real ‘Go West’ and Belt and Road Initiative if Afghanistan remains in chaos.
The China-Pakistan Economic Corridor (CPEC) will cost well over $65 billion and should be ready by 2030. The most recent IMF report (from May) noted that as a result of the CPEC investments and improved power generation, Pakistan’s GDP will grow to about 5.6%. High imports for the CPEC project, however, have created a lopsided trade deficit - $$6.6 billion in goods from July-December 2017, about ten times the value of goods sold by Pakistan to China. There is no indication that this imbalance can be easily remedied. Pakistan’s economy will be increasingly reliant upon Chinese investment and Chinese loans.
The United States government is unhappy with the Chinese role in Pakistan. US Secretary of State Mike Pompeo has saidthat the US would not like it if the IMF loaned Pakistan money that would be used to pay off Chinese creditors. ‘Make no mistake. We will be watching what the IMF does’, Pompeo said.
What the US would like is for any IMF bailout to be premised on serious IMF surveillance of the CPEC project. It would like the IMF economists to be given full access to all the documents related to the Chinese-Pakistani investment projects. The US has said that Chinese infrastructural investments saddle countries like Pakistan with enormous debt. But what is not known are the terms of these arrangements. China is not keen to have these made public – for whatever reasons. It would rather give Pakistan new loans than have the IMF scrutinize those documents, which would then be made available to the US government.
Pakistan’s former finance minister Miftah Ismail told Reuters that the Chinese loans are not onerous. ‘These are not loans that will break our back’, he said. The Chinese investments in the CPEC are enough collateral for them to keep financing the Pakistani government. Pakistan lost its cheque-book in Saudi Arabia when it refused to send troops for the maddening war against Yemen.
If the IMF asks for ridiculous terms, Imran Khan will be forced into a tighter embrace with Beijing. There are few choices before him. No wonder he wants to celebrate his accession to the prime ministership with just a few friends. There are too many sharks swimming around Pakistan.