The cabinet meeting chaired by Prime Minister Shahid Khaqan Abbasi was briefed on the state of the economy and the continued challenges to the balance of payment position with possible negative implications on the economy of ratcheting up the rhetoric with the United States subsequent to the announcement of the South Asia policy by President Donald Trump. This concern was reportedly noted after presenting favourable macroeconomic data for the fiscal year just past when Gross Domestic Product registered a growth of 5.3 percent, large-scale manufacturing of 5.6 percent, per capita income rose from 1334 dollars per annum to 1629 dollars per annum, tax collections were 3362 billion rupees, remittances increased to 19.3 billion dollars, foreign direct investment rose to 2.4 billion dollars, foreign exchange reserves were 21.4 billion dollars and the deficit declined to 5.8 percent of GDP.
While this newspaper has consistently challenged statistics released by the Pakistan Bureau of Statistics (PBS) on grounds that they are neither rationalized with data released by other government departments nor with credible industry sources, however, to evaluate the possible impact of the US withdrawal from the Pakistan economy it is necessary to identify the contributions made to our economy by the US last year. Firstly, there was considerable US engagement in the development of our infrastructure. In 2016-17, 1.1 billion dollar (grant) project assistance inclusive of sector experts was released through the USAID, particularly for the energy and agriculture sectors. Secondly, 74.5 billion rupees under the Coalition Support Fund (CSF) was released which is lower than the budgeted 170.7 billion rupees for the year. The last CSF payment was in March this year and it is doubtful if the 141.7 billion rupees budgeted for 2017-18 would be released irrespective of US-Pakistan relations. Thirdly, the US was perhaps the only developed country with which Pakistan registered a trade surplus last year to the tune of 809 million dollars.
And finally, it must be recalled that the US played a critical role in the past in 'influencing' multilateral agencies to approve lending to Pakistan - the World Bank whose chief executive's position is always held by a US national, as well as other lending agencies like the Asian Development Bank where the US together with Japan holds the largest number of shares. The cabinet reportedly discussed the possibility of going on yet another lending programme shortly after the elections - a view that has been consistently denied by Finance Minister Dar though it has been challenged by economists and BR on grounds that the massive reliance on borrowing from abroad (be it as debt equity or outright loans) during the past four years would make it highly likely that the country would be compelled to go on yet another donor-funded programme.
However, the foregoing strongly relies on the assumption that the US would simply withdraw from the Pakistan economy. History shows that the US has the capacity and has shown a will to impose sanctions on what it considers recalcitrant nations and take along its Western allies who, in spite of considerable reservations with Trump's policies, are likely to remain engaged with the US during his presidency given the scale and extent of their economic ties and geopolitical considerations. Sanctions imposed on Pakistan would have massive implications on not only our ability to borrow from abroad but also cut off our access to export markets. Foreign exchange reserves, strengthened through borrowing by Dar, would tumble to less than three months of imports in less than a week. One would hope that the Shahid Khaqan Abbasi administration is savvy enough to understand that Trump, whatever his bias against Muslims and in favour of India maybe, does have the wherewithal to take measures that would plunge this country into a state of an economic downward spiral that China Pakistan Economic Corridor or accessing oil from Russia instead of from US allies may not be able to arrest.
In this scenario to ratchet up the rhetoric against the US is ill advised and the government must seek to convince all domestic pressure groups, including the business community and the media, to present a more informed narrative in this regard. And one would also urge ministers not to be guided by politics based on public opinion at present but on what is in the long-term national interest.
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