EDITORIAL: Former SBP (State Bank of Pakistan) governor Murtaza Syed’s warning that the fine print in the new IMF (International Monetary Fund) deal implies “Fund speak for securing secret debt relief from China” should be investigated and explained immediately.
He noted that the EFF (Extended Fund Facility) will provide much needed relief to Pakistan, but for the SLA (Staff-Level Agreement) to become official, “the country requires financing assurances from its developmental and bilateral partners”. He reads this particular clause as “wrong, incomplete and dangerous” because “Pakistan’s debt problem is not a Chinese debt trap”.
Pakistan’s debt is no doubt unsustainable, as he duly pointed out, but its foreign creditors are fairly diversified, and the country does indeed “owe more to multilateral development banks like World Bank, IMF and the Paris Club than to China”.
It remains to be seen whether Murtaza Syed’s claim is correct, of course, but it’s a fair point that the IMF is now globally considered an extension of the US State and Treasury departments, and is often employed for leverage, depending on overriding political conditions in Washington.
There’s also no doubt that the American government is dead against the CPEC (China Pakistan Economic Corridor) not just because China’s BRI (Belt and Road Initiative) was initiated just a few years before its own Pivot to Asia – when the Obama Administration identified Asia-Pacific as the region of highest concern – but also because of China’s growing dominance in international geopolitics.
And while China’s fiscal outreach to the rest of Asia and parts of Africa has created debt-related complications, the charges of “predatory lending” and “Chinese debt trap” have been creations of the usually savage American media.
So, if the former SBP governor’s fears are true, then Pakistan is really caught in a very fragile situation.
China is our best friend, largest foreign investor, and strongest pillar of support, no doubt, but we’re sure to default within a fiscal or two if we break from the IMF at this point, which means we’re also forced to toe US interests just when the Sino-American rivalry is heating up.
In fact, another Trump White House – an increasingly likely scenario – will lead to immediate trade, tariff and currency wars between the world’s biggest and second-biggest economies, which will play out in different ways in countries that are caught in the middle, just like Pakistan.
It’s best if the finance ministry clears this point before going any further. The honest people of Pakistan are about to be put under the tax knife just because the country’s leaders destroyed the economy, after all, so they should know if their government has still only got them half a bailout programme that has disastrous financial implications for them and ominous political costs for the country as well.
Surely, the Chinese would also want to know. For a country that they help so much to go ahead and endorse the chorus of Chinese debt trap would not go down very nicely in Beijing. The government should answer these questions before doubts begin to grow.
Copyright Business Recorder, 2024
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