By: Mihir Sharma
Pakistan’s founder, Mohammad Ali Jinnah, was convinced his fledgling nation’s most valuable asset was its location. In an interview a month after independence in 1947, Margaret Bourke-White of Life magazine painted a vivid picture of Jinnah’s expectations: “‘Pakistan is the pivot of the world, as we are placed’ — he revolved his long forefinger in bony circles — ‘at the frontier on which the future position of the world revolves.’”
In 1947, the world was just entering a cold war. Bourke-White explained that Pakistanis expected the United States to pay handsomely for a strategically located ally’s development — and to fund its military as well.
Decades later, tragically little has changed. As the U.S. follows through on President Joe Biden’s ill-considered abandonment of Afghanistan, Pakistani leaders are convinced they can use their leverage over the Taliban to win concessions from the U.S. Seven decades of geopolitical stratagems of this sort have not helped Pakistan, its citizens or its economy. Islamabad shouldn’t expect them to work any better this time.
U.S. combat troops will have left Afghanistan by September. That’s also when the International Monetary Fund conducts a much-delayed review of its $6 billion bailout of Pakistan. The IMF wants Pakistan to step up the pace of macroeconomic reforms, particularly in its troubled energy sector.
Prime Minister Imran Khan, on the other hand, is very conscious that elections are only two years away. So, the budget his government presented last month didn’t quite meet the IMF’s demands. While the budget did include a few tiny steps towards balancing Pakistan’s books, even those set off a political storm. One — a tax on mobile data usage — was immediately withdrawn.
Khan doesn’t want to abandon the Islamist welfare state he promised voters in 2018. He has also pledged that his “new Pakistan” will stand up to the West more. Finance Minister Shaukat Tarin, defending the budget that was supposed to placate the IMF, thus insisted that Khan had “stood his ground” against the lender and, in fact, was expanding the welfare state. The IMF won’t be happy. And if it isn’t, Pakistan’s other big multilateral lenders, particularly the Asian Development Bank, won’t step in to help either.
That’s where the U.S. comes in. In that 1947 interview, Jinnah claimed that “the United States needs Pakistan more than Pakistan needs the United States.” Similarly, the Financial Times recently reported that the government hopes that the U.S. need for help in stabilizing Afghanistan after the withdrawal should give Pakistan “some space,” particularly when it comes to the IMF. (Tarin denied the report.)
Speaking to the New York Times, Khan claimed he was ready to cooperate with the U.S. and “do everything except use military action against the Taliban.” Yet, as one former Pakistani diplomat has pointed out, it’s hardly helping now. The Taliban’s leaders continue to live safely in Pakistan, even as they slow-walk negotiations with the Afghan government and continue to seize territory.
Playing such games has not served Pakistan well. The last time Afghanistan fell to the Taliban, Pakistan had to deal with a flood of refugees and the permanent destabilization of its Pashtun-majority border areas. Worse, the Taliban have incubated and inspired other extremist movements, including in Pakistan itself. Between 2008 and 2016, the Pakistani version of the Taliban struck at will across the country — most horrifically, killing 132 schoolchildren in an army school in Peshawar in December 2014.
Geopolitical conditions are also less favorable now. Pakistan’s early leaders prospered from picking the American side in the cold war. But a world increasingly shaped by disputes between the U.S. and China doesn’t look to be as profitable.
Khan told the New York Times that what he really wanted was for the U.S. and China to “get on and trade with each other” — perhaps so his government could receive handouts from both. But Beijing isn’t exactly rushing to fill the gaps in Islamabad’s budget. Meanwhile, the U.S. doesn’t trust a Pakistan that it fears will use bailout money to pay bondholders linked to the Chinese state.
More importantly, handouts would only perpetuate the boom-bust-and-bailout cycle that’s hampered the Pakistani economy for years now. If Khan really wants his country to prosper, he should focus on the tough structural reforms the IMF is demanding and put the economy on a more sustainable path. He may worry about the political cost. The price of continuing to coddle extremists would be much higher.
Mihir Swarup Sharma is a Bloomberg Opinion columnist. He is a senior fellow at the Observer Research Foundation in New Delhi and head of its Economy and Growth Program. He is the author of “Restart: The Last Chance for the Indian Economy,” and co-editor of “What the Economy Needs Now.”