Future policy of Pakistan and India
Answers
The press coverage of the post-election situation in Pakistan has shifted slowly from the initial focus on Imran Khan’s links with the army, and a Khan government’s likely policy vis-à-vis India, to the country’s dire economic situation. The last two are linked, but more on that in a moment.
A picture of TN Ninan, chairman of Business Standard Private LimitedPakistan’s foreign exchange reserves have dipped sharply this past year, while the current account deficit has soared and bulk loan repayments loom over the horizon. The Pakistani rupee has taken a tumble, even as the central bank has jacked up interest rates sharply, by 100 basis points last month, following an increase in May. Economic growth is certain to dip after a six-year acceleration that saw it peak at 5.6 per cent. A loan application to the International Monetary Fund (IMF) seems unavoidable.
That raises the interesting prospect of a US vs China play-off. China has become Pakistan’s biggest international funder, accounting for 38 per cent of foreign money taken in by Islamabad in fiscal 2017 (ended June); no data is available as yet for fiscal 2018. Meanwhile, the US is the largest shareholder in the IMF with one-sixth of the vote, and has said that it will oppose IMF money being used by Pakistan to repay Chinese loans. That does not mean a loan will not be approved, but Pakistan will have to win the support of other major economies.