Pakistan’s economy is on the brink of collapse, and Prime Minister Imran Khan is facing immense pressure from the opposition parties to bail out Pakistan from the precarious situation. With outstanding debt of more than $85 billion and the annual inflation rate at 11.63 percent in August, 2019 (the highest inflation rate since May, 2012), Pakistan is in dire straits with growing pressure from the people to relieve them from skyrocketing prices of food & non-alcoholic beverages, transport, clothing & footwear, furniture & household equipment, and miscellaneous goods & services.
Against the backdrop of growing dissent among the masses, the abrogation of article 370 in Kashmir by the Narendra Modi-led government of India has come in like a shot in the arm for Imran Khan. PM Khan is leveraging it to create a war bogey with India to divert the attention of the people from the precarious economic condition.
Why can Pakistan not wage war with India?
According to the World Bank, Pakistan’s gross domestic product (GDP) stood at $254 billion at the end of 2018 as compared to India’s $2.84 trillion. The Indian economy was more than 11 times that of Pakistan’s economy in 2018. Growing fiscal balance has further queered the pitch of Pakistan. According to a Bloomberg report, it is 8.9 percent of the GDP – reportedly the maximum in almost three decades.
Pakistan has a record of borrowing money to carry itself on. The country’s outstanding debt is more than $85 billion. It has taken loans from a large number of countries in the Middle East and Western Europe. Its largest creditor is China. Pakistan has also received considerable loans from several international institutions. In May 2019, Pakistan approached the IMF for the 23rd time since its inception, for a $6 billion bailout.
The IMF in its July report said “Pakistan’s economy is at an important juncture. The legacy of large fiscal deficits, loose monetary policy, misaligned economic policies, and an overvalued exchange rate boosted consumption and short-term growth, but steadily eroded macroeconomic buffers, increased public and external debt, and depleted international reserves”.
With the cost of war being extraordinarily high and prospects of sanctions looming over its links to militants, Imran Khan has little option diplomatically or militarily, except sabre-rattling over Kashmir.
According to defence and political analysts, the economy is hindering Pakistan’s options. With precarious economic conditions, their capacity to bear the cost of a full-fledged conflict with India over Kashmir, whether conventional or via insurgent networks, is ruled out.
Even Taliban leaders of Afghanistan, who have long enjoyed Pakistan patronage, have turned their backs on their ally. Taliban have renounced Pakistan’s attempt to link the Afghanistan issue with Kashmir. The Taliban in a statement said, “Linking the issue of Kashmir with that of Afghanistan will not help in improving the Afghanistan crisis”. The statement said that the issue of Afghanistan is not related, nor should Afghanistan be turned into the theatre of competition between other countries.
Prime Minister Imran Khan seems worried about the lack of options and the possibility of international sanctions also appears to be weighing on Khan. The prime minister told a group of journalists, “We are making a sincere effort to bring Pakistan out of FATF,” referring to the Financial Action Task Force. The Paris-based group that monitors terrorist financing will vote in October on whether Pakistan has done enough to check militant networks at home.
Nearly broke and facing unprecedented inflation and with only China siding with it, Imran Khan appears to be running out of ideas over Kashmir and hence the sabre-rattling to divert the attention of the masses.