Pakistan's Economic Situation & Geopolitical Free Lunches

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2023-04-18T08:11:04+05:00 Umer Farooq
The Pakistani state’s financial viability under existing economic structures will be severely tested in the next three years. According to a recent report, Pakistan will have to repay $77.5 billion from April 2023 till June 2026. With our economic base hardly producing anything of tangible value for the international market, there is a strong possibility that the present financial crisis faced by the Pakistani government will not be the last one in the next three years.  With productivity at its lowest, exports negligible, ever dwindling foreign remittances and an ever-narrowing tax base, it appears impossible for the Pakistani state to manage its finances on its own in the next three years. The fear of default will hang like a sword of Damocles over our heads. According to the report mentioned above in the year 2024-25, Pakistan’s debt servicing is likely to be around $24.6 billion. In 2025-26, the debt servicing burden is likely to be at least $23 billion. Neither of Pakistan’s major political parties have demonstrated any signs of innovative thinking, and there seems to be economic program on the horizon that could lead us out of this financial quagmire. In such a situation, we will be ever dependent on our friends and on their financial generosity to keep the Pakistani state afloat in these difficult times.

In a situation where Pakistan’s economy will be under producing and will not be exporting any valuable amounts of products to the international market that could foot our import bills, our only option would be to sell to the international community the commodity that we are good at producing – an organized military force and organized military manpower.



What exactly could the Pakistani state offer to its friends in return for earning their financial generosity? One thing is for sure, that the persistent financial crisis that the Pakistani state will face in the next three years has the potential to change the strategic shape of the Pakistani state. How would we manage our anti-India streak in our strategic thinking, when even the closest of our allies have in the recent past publicly advised Pakistan to desist from any kind of adventurism in South Asia? But that doesn’t mean that Pakistan’s military will lose attraction for our foreign friends. One immediate international concern that the Pakistani military and security establishment could address at the moment is the rise of new threats in Afghanistan that could potentially destabilize the whole region. ISIS is one such threat and there are many radical groups within the Taliban’s ranks that could part company with the parent organization to join hands with another franchise of international terror that projects itself as dealing in more radical terror ideologies. In a situation where the redefinition of our strategic and military roles could become a necessity in the times of financial crunch, the reorientation of the military’s self-defined strategic and military roles is a real possibility.

Normally, in the times of such financial crises, apprehensions about Pakistan’s strategic weapons program start to manifest themselves in media reporting and political commentaries. A particular group of people start to express apprehensions, that in return for providing financial assistance, the Pakistani state would be forced to abandon the strategic weapons program. This is a very crude way of presenting the implications of our financial woes for our strategic situation in stark terms.  Even more crude will be the argument that nuclear weapons and ballistic missiles of a financially unviable state could pose a threat to the state itself and could hardly be considered a functional deterrence in the face of chaos and anarchy gripping society. My argument is a little subtler than these propagandist themes that have been forced upon this unfortunate nation over the years.

In a situation where Pakistan’s economy will be under producing and will not be exporting any valuable amounts of products to the international market that could foot our import bills, our only option would be to sell to the international community the commodity that we are good at producing – an organized military force and organized military manpower. Remember that the situation in Afghanistan presents a scenario where the international community—both the west, the Middle East and China, Russia and Iran—would be in need of a player that could act as a bulwark against rising tide of Sunni militancy in Afghanistan. In such a situation, Prime Minister Shahbaz Sharif’s comment that the “new Army Chief’s” hectic diplomacy in Arab sheikhdoms ensured the provision of much needed funds that are required to ward off a default against our international financial commitments, could only be described as cryptic. This means Pakistani military leaders still have the leverage with the Arab Sheikhdoms that could convince oil rich Arab countries to provide us with required funds. As they say in the economics discipline, “there are no free lunches;” the same applies in international politics and in the world of international security. This would mean two things, that the Pakistani security establishment has either been showcasing its capability to generate military manpower and its military expertise to friendly countries, or there is a willingness among the Arab sheikhdoms to employ Pakistan military manpower in whatever form for internal security duties.

Two possible forms witnessed in recent years include Pakistani servicemen performing security duties in Qatar during the FIFA Football World Cup and second form is the way in which retired army personnel were hired by Bahrain government for internal security duties to ward off a Shia revolt in their tiny state. The deployment of Pakistani units in Saudi Arabia was another form. Yet another form of this extra-territorial role for Pakistani troops or security agencies is the way countries like Russia, Iran and China are consulting with Pakistani military leaders on the issues relating to the rising tide of terrorism in Afghanistan. There exists a formal arrangement for the Pakistani security apparatus to assist Afghan Taliban in their fight against ISIS-Khorasan with the assistance of regional intelligence agencies. However, nothing of this arrangement has been made public, except the fact that regional intelligence chiefs have met in recent months to coordinate their efforts in this regard. This is not a role that is being forced on the Pakistani state. These are roles that are coming Pakistan’s way after Pakistani military leaders showcased their capability before the world.

We will have to rethink the way we have been handling our security and the issues relating to regional security. The luxury of having a primarily India oriented, adventurist security policy will have to be abandoned.



At the same time, the Pakistani military seemed to be getting ready for a more strategic role at the regional level in collaboration with the Chinese People’s Liberation Army. Recent Reports by a Washington based think-tank indicate that Chinese and Pakistani military are working towards a framework where they could have joint military planning for regional security. The United States Institute of Peace’s report describes Pakistan-China military cooperation as a quasi-military alliance, with the Chinese intending to use the Pakistani coast as a toehold for their presence in the greater Indian Ocean. This, however, is a tricky business—the fact that this arrangement would not make Americans very happy is a foregone conclusion. This arrangement will also result in heightened military tensions in South Asia. This would also mean that the Pakistani state would be ready to put all its eggs in the Chinese basket.

If the present financial crisis and the way Pakistani financial wizards are trying to avert a default are any guide, the Chinese government is only footing part of the bill to meet our financial requirements. In case we put all our eggs in the Chinese basket, will China meet all our financial requirements? Interestingly, the major chunk of the loans which we have to pay back in the next three years come from Chinese financial institutions. But remember, there are no free lunches in international politics. This financial crisis carries a potential to dramatically change the strategic shape of our state. What exactly is the Pakistani state’s initiative to reconnect with Washington’s security establishment in such a situation is not very difficult to judge. Perhaps they think that in this way they can engage in a delicate balancing act between two superpowers. Not at all an easy task, though.

Two implications of this financial crisis are crystal clear. First, we will have to rethink the way we have been handling our security and the issues relating to regional security. The luxury of having a primarily India oriented, adventurist security policy will have to be abandoned. We will have to rework our security thinking in the light of the whims and security perceptions of our financial saviors. Secondly, it will again be the military leaders who will give shape to this new security architecture. They will be in the driving seat, while the political leadership keep themselves busy with trivial things in the circus of parliamentary politics such as elections, bench formations, evading arrests and filing bail applications in courts.

History is witness to the tragedies that have been wrought on the Pakistani people when Pakistan’s security leadership has been the only force giving direction to our strategic priorities. It seems that this history might repeat itself. What a pity.
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