It’s the economy, stupid: The Imran Khan drama, other political rows are holding Pak’s dire finances hostage

Pakistan’s political climate has been volatile for a while now. A special bench of the Islamabad High Court (IHC) on Friday (May 12), granted bail to former Pakistani prime minister Imran Khan for two weeks in all ongoing cases. However, the political theatrics that are ripping Pakistan apart are also diverting attention away from the country’s underlying problem: a broken and ailing economy.

With inflation touching a 50-year high, putting food on the table has become a challenge for Pakistan’s poorest, who account for one-third of the population. 

Pakistan overtook Sri Lanka for Asia’s fastest inflation in April, as a weaker currency and rising food and energy costs propelled price hike to a record, reported Bloomberg. 

ALSO WATCH | Pakistan needs significantly more financing for successful bailout review-IMF

The country’s currency, the Pakistani rupee, fell to a new low when the military intervened to put an end to violent protests sparked by the arrest Khan on Tuesday (May 9).

According to Arif Habib Ltd’s foreign-exchange desk, the rupee fell 3.3 per cent to an all-time low of $300 per dollar on Thursday (May 11).

In a nutshell, Pakistan is one of the 25 nations in the world with the lowest level of human development.

There is also a significant external dimension to the problem, with rising global food and fuel costs as a result of Russia’s war in Ukraine. The confluence of all of these variables has resulted in what may be Pakistan’s greatest economic crisis to date.

However, the political crisis that is consuming Pakistan is undermining expectations that the South Asian country would soon be able to resume its much-needed International Monetary Fund (IMF) programme and avoid a full-fledged financial crisis.

“Time is ticking away. It seems the IMF still has reservations that Pakistan has not met all the conditions to reach an agreement for it to release the $1.2 billion loan tranche under an already agreed loan facility,” Prof Ajay Darshan Behera, Academy of International Studies, Jamia Millia Islamia, New Delhi, told WION. 

“Pakistan needs $4 billion by this June to meet its debt obligations. In addition, it needs another $11 billion for debt repayments by December 2023. Without the $1.2 billion coming through from the IMF soon, other countries are also not going to release committed loans to Pakistan. In this scenario, Pakistan is likely to default on its loans,” added Prof. Behera. 

Pakistan is expected to repay $73 billion by 2025, but this will be difficult without debt restructuring.

“Pakistan’s economy desperately requires external support to avoid the default and also stabilise. The IMF loan, even if it comes through, cannot resolve the economic crisis for the country. It will only give it a breather,” Dr Shalini Chawla, Distinguished Fellow at the Centre for Air Power Studies, New Delhi, told WION. 

“The IMF loan will open other channels of funding for Pakistan. So the country needs to convince the IMF. Additionally, what can actually alter the economic dynamics of Pakistan is a debt waiver. Pakistan should seek a debt waiver from China given the fact that it owes a significant percentage of debt to China and Beijing is its strongest ally,” added Dr Chawla.

Why was Imran Khan arrested?

The Pakistan Tehreek-e-Insaf (PTI) chief was arrested on Tuesday (May 9) during an appearance at the Islamabad High Court in connection with several lawsuits brought against him. Khan had been arrested in connection with the Al-Qadir Trust case, which also involves his wife and other PTI leaders.