There is an emerging consensus that the Khan administration's economic diplomacy has been extremely successful to-date, if economic diplomacy is defined as incurring loans and procuring oil products on deferred payment, though increasingly claims are being made that the man spearheading this success is not the Prime Minister or indeed his Foreign Minister but the Chief of Army Staff (CoAS) Bajwa.
The timing of the official foreign visits undertaken by CoAS and the civilian administration reveal that General Bajwa's visits to Saudi Arabia, the United Arab Emirates, China and more recently Qatar pre-dated the visits of the Foreign Minister to the capitals of these "friendly countries", during which legal modalities of assistance packages were firmed up. This was followed with a visit by Prime Minister Imran Khan which culminated in a formal announcement by Pakistan of the assistance package - a formal announcement that reportedly angered the friendly countries as they are all known for being extremely reticent about their assistance packages.
These assistance packages are critical to ensuring that Pakistan does not default on its foreign loans in the short term (till the end of the current fiscal year on 30 June 2019) as well as enabling the country to cope with the unsustainable twin deficits - budget and current account. The Saudi package is a loan at an interest rate of 3.4 percent per annum (comparable to prevailing low rates in the international market) and entails parking 3 billion dollars (a similar amount anticipated from the UAE and/or Qatar with 2 billion dollars from China as a commercial loan) and another 3 billion dollars as deferred oil payment facility for up to three years (a similar amount expected from the UAE with reports circulating in Islamabad that the Saudi/the UAE package is contingent on Pakistan not taking any assistance from Qatar). The previous administration failed to access any loans from Saudi Arabia and the UAE subsequent to the resolution passed by the National Assembly refusing to become part of the Yemen conflict (with Pakistan Tehreek-e-Insaf a vocal proponent of the resolution) though PML-N administration did procure around 13 billion dollars as commercial short term loans from China during its five-year tenure. Few in Pakistan believe that the terms of the Saudi/the UAE loans have changed since the passage of the resolution though given the prospect of an imminent default few would not support this particular U-turn.
According to the State Bank of Pakistan (SBP) website, total repayment of external loans/associated interest is 10,929.75 million dollars for the current year; sadly the SBP has not updated the debt since September 2018 so the inflows from friendly countries, their repayment schedule and the applicable interest has not been uploaded, no doubt as a favour to the federal government.
The rupee's erosion as the incumbent government has wisely refused to keep the rupee propped up (though it would not have been able to keep the rupee overvalued in any case as foreign exchange reserves are simply not enough to engage in such a policy) has been stayed as the amount parked by these friendly countries is providing some measure of stability to the rupee.
However, neither the prime minister nor his cabinet considers loans a desired form of meeting the country's foreign exchange needs and the rhetorical focus has been on fuelling exports, reducing imports, and increasing remittances. To reflect these objectives economic diplomacy was the theme of the conference organized by Ministry of Foreign Affairs, Ministry of Commerce and the Board of Investment (27-28 December) in Islamabad which was attended by our envoys stationed abroad and representatives from the public and private sector. It was addressed by cabinet heavyweights including the Prime Minister, Foreign Minister, Finance Minister, Advisor to the Prime Minister on Commerce, Textiles, Industry and Production and Investment, Advisor to the PM on Institutional Reforms and Austerity and Board of Investment Chairman. The conference deliberated on ways to enhance Foreign Direct Investment (FDI) and trade, particularly exports, as well as fuel remittances through frequently engaging with overseas Pakistanis.
The Prime Minister while addressing the conference participants stated that the country is "sorely in need of a change in mindset whereby we shed our 'dependency syndrome'" which, ironically, is the only success the Khan administration has had during the four and half months in power. The Prime Minister further stated that 'our biggest asset is overseas Pakistanis and the more we remain in touch with them [the better we can build trust]...when our Board of Investment people go abroad, they should invite them to dinners and hold meetings with them." On a facetious note, one would hope that the Prime Minister realizes this implies a considerable increase in the entertainment allowance of relevant embassy staff and visiting BoI officials; on a more serious note, he needs to understand that, at present, the legal and business environment (with encroachments/appropriation by local influentials' of property/assets owned by overseas Pakistanis) needs considerable strengthening and trying to lure overseas Pakistanis to invest their hard earned cash simply by being dined by embassy staff/BoI officials does not give the desired results. Additionally, Prime Minister Khan needs to finally acknowledge that unlike charitable donations investment decisions by foreigners/overseas Pakistanis are made on the basis of economic considerations as their plans for retirement and the future of their families depend on these decisions.
Wealth creation through higher productivity is rarely if ever effected through a plea by a country's chief executive as was patently evident during previous administrations. Investment decisions by foreigners and locals alike are made after a careful assessment of the political situation and prevalent economic policies, (with the Turks as well as other foreign investors briefed by their embassies in Pakistan while overseas Pakistanis access information from sources other than government officials). At present, the PTI has a tenuous majority in parliament which impedes the laying of any amendments/bills; and disturbingly has yet to formulate necessary economic reform policies (or if formulated to share them with the public) which is reflected by sustained market uncertainty.
To conclude, Imran Khan did a Nawaz Sharif and an Asif Ali Zardari on his first trip to Turkey as the country's Prime Minister: while he was making an impassioned plea for Turkish businesses to enter the 'lucrative' Pakistani market, tripping as a consequence of fog accounted for more than 12-hour load-shedding in key industrial towns back home.