Daily Times

After his victory in Wednesday’s election, Khan made a televised address which was a sort of rehearsal for his inaugural speech as prime minister. Once in office he vowed to improve the lives of the poor, fight corruption, plant ten billion trees, issue health and education cards, create ten million jobs in the next five years and build half a million houses for the poor.

These are all very tall promises. Even if all they were ever fulfilled, they will fall far too short of Pakistan’s real needs, considering the existing levels of deprivation. The macro-economy is in a catastrophic state. There is no new plan to fix it apart from the age-old solution of borrowing from imperialist financial institutions. One of the first challenges he’ll need to tackle is easing the foreign-reserves crunch.

The country’s buffers have been steadily dwindling as a result surging imports and debt, forcing the central bank to devalue the currency four times since December. All of that comes against a global backdrop of higher oil prices, trade war tensions and an emerging-market sell-off. Asad Umar, the PTI’s shadow finance minister, says no option will be ruled out as a way out of a severe economic crisis, including knocking on the doors of the International Monetary Fund (IMF). Pakistan’s reserves have recently dropped at the fastest rate in Asia to $9.1 billion, according to data compiled by Bloomberg.

Reserves are now below the level reached when the country approached the IMF for a bailout on the last two occasions. Bloomberg wrote: “The IMF will not be that easy this time around. Lots of structural reforms were delayed or not done last time. They will be much tougher in the enforcement process, whether it’s privatization program, revamping the tax infrastructure, or widening the tax net. It’s not going to be easy on the ground level.”The economy is already expected to slow down for the first time in six years to 5.2 percent or even less this year.

Like all its predecessors, the PTI government will not be able to touch the largest chunk of the country’s GDP: imperialist debt servicing. Similarly, it would be considered a sin to even think of cutting military expenditure. More than two-thirds of the budget is spent on these two sectors

Like most populists, Imran Khan’s ‘easy’ solution to raise finances is to increase the tax base. While Pakistan has increased its tax-to-GDP ratio in recent years to 12.5 percent in the year through June, it is still among the lowest in Asia.

Most of the government’s tax revenue comes from indirect levies, and there’s a huge pool of untaxed money that can be tapped in real estate and savings instruments, as well as non-declaration of income. Pakistan’s bourgeois cannot exist as such if they pay their taxes and stop plundering the exchequer. Foreign investors only bring in their money on harsh conditions, including tax reliefs on their profits and their smooth and unhindered transfers to their headquarters. That leaves almost no room for the PTI government to raise the funds needed to pay the interest on loans and reduce the deficits in the trade, budget and fiscal sectors. In fact Pakistan faces a mammoth task in this fiscal year alone: to arrange around $11 billion to fill its external financing gap. The deficit is higher than Pakistan’s gross official foreign currency reserves, which currently stand at $9 billion. Experts say that even the IMF cannot fill this gap. Its last bailout in 2013 brought Pakistan over $6 billion spread across three years.

The Ministry of Finance, the IMF and independent economists have assessed Pakistan’s gross external financing needs for 2018-19 to fall in the range of $23 billion to $28 billion.In any case, it will not be that easy to seek an IMF package. The lender will impose certain politically unpopular actions, including privatisation of state-owned enterprises, severe cuts, price hikes through indirect taxation and other stringent austerity measures that will squeeze the working classes and play havoc with the lives of the already impoverished masses.

With this level of dependence on the IMF and other imperialist institutions, Imran Khan won’t have much say in economic affairs. The IMF will call the shots, and this government will have no option but to carry out imperialist demands that will have drastic impacts on society. Like all its predecessors, the PTI government will not be able to touch the largest chunk of the country’s GDP: imperialist (Western or Eastern) debt servicing. Similarly it would be considered a sin to even think of cutting military expenditure.

More than two-thirds of the budget is spent on these two sectors, while the rest is mostly spent on the functioning of the state. The funds raised by turning government rest houses into hotels and other tourism projects will not be able to raise even a trickle towards the massive debts and deficits that have to be paid back and filled. As for health and education, it will yet again be the private sector that will suck the blood of poor patients and parents, as neither the system’s ideology nor its near-bankrupt financial condition have much to offer in terms of human development. Imran’s assertion of turning the prime minister and Governor’s housed into public places is cheap gimmickry borrowed from Gandhi and other Indian elite politicians. It will not solve any of the agonising problems inflicted upon the masses.

Imran may be the blue-eyed boy of his country’s masters, but still he will not be allowed to dabble in the domain of foreign affairs or security issues. His powers will be no greater than those of Sharif or any previous civilian prime ministers. Despite his macho imaging, he will remain subservient to the state in all the crucial policies of the country, including relations with India. His utopian promises will soon be exposed, and his honeymoon period could be much shorter than he envisages. The current crisis will only worsen, exacerbating the problems of the economy and the resulting social and political turbulence.

The writer is the editor of Asian Marxist Review and International Secretary of Pakistan Trade Union Defence Campaign. He can be reached at ptudc@hotmail.com

Published in Daily Times, July 31^st 2018.