Finance: Setting clear priorities – Newspaper

National security and broader alignment with the emerging world order have emerged as Pakistan’s new priorities, something politicians and the public need to understand, as a delayed reckoning of this reality could be counterproductive for both.

The hybrid regime is rolling out several legal and technical measures that promise better governance and ensure the vigilance of Pakistan’s cyberspace as a key checkpoint of the national security paradigm. This means diminishing space for expressing dissent and anything the establishment may define as detrimental to the state’s interests; the Digital Nation Pakistan Bill is one big example.

Meanwhile, Pakistan has secured its first long-term (2026-2035) World Bank Partnership, which initially promises $20 billion in funding in six key areas over the next decade. Moreover, we have apparently managed to strike a balance between our ties with the world’s two superpowers — the US and China.

The signing of the 10-year partnership with the World Bank and balancing of ties with the US and China indicate that the Pakistani establishment can be expected to align the country at least broadly with the emerging world order.

Imports have started growing even though large-scale manufacturing output is not picking up

This places critical emphasis on diminishing any kind of terrorism, militancy, religious and sectarian intolerance and usurpation of the rights of women and other minorities and marginalised groups; a tall order indeed. How well this hybrid regime maintains national security is not clear right now.

However, with time, it would become clearer, first to the top tiers of Pakistan’s political and bureaucratic structures and then to most educated Pakistanis. People, industries, and businesses that hate being monitored and regulated under a national security paradigm and are searching for interconnectedness with the world at large may also be shocked to learn that the old days may be gone.

The relative calm in the rough seas of our external economy has emboldened the present hybrid regime to envision such a National Priorities Plan. But how long this regime can maintain this calm is not clear yet because so far external funding — be it from the International Monetary Fund (IMF), the World Bank or friendly countries like China, Saudi Arabia and the United Arab Emirates — has contributed more towards maintaining some form of stability than actual economic growth.

Since external funding from international financial institutions and even funding from friendly countries is always tied to some “open” and possibly “undisclosed” conditions, the hybrid regime has been focusing on growing exports, remittances and foreign investment with varying degrees of success in each area and at varying costs. The 10-year, longer-term $20bn partnership with the World Bank has been secured while keeping in view the country’s potential for forex earnings through exports, remittances, and foreign investment.

Most of the projects that the civil-military-run Special Investment Facilitation Council hopes to construct with massive foreign investment in the pipeline are such that it would take several years to come into operation. And not all of them will be operational at the same time. So, the situation demands that their projected contributions to Pakistan’s economy, particularly to its revenue generation and exports, should be made realistically — and not just to score political mileage.

The situation also demands that projections about economic growth and industrial revival be more realistic to help the country avoid economic crises of unmanageable proportions between now and 2035. That is where the longer-term country partnership with the World Bank matters. Though the initially declared funding under this 10-year partnership is $20bn, it could rise to $30bn to $40bn, according to media reports.

In addition to partnering with the World Bank to secure funding facilities, the country’s economic managers are also trying to get something from global green funds by presenting to world organisations its need for and capacity to utilise these funds efficiently.

Pakistan has already been in talks with the IMF to top up its $7bn ongoing lending programme with at least $2bn additional funding to undertake green projects in the country. In all, the fate of green fund inflows is much less uncertain than the actual timing and size of the inflows.

That is why we not only see a push for boosting exports and remittances but also continually hear about the launching of sovereign bonds. Finance Minister Muhammad Aurangzeb has recently said that Pakistan plans to issue Yuan-denominated Panda Bonds by June of this year to raise $200 million to $250m.

Imports have started growing even though large-scale manufacturing (LSM) output is not picking up. LSM output fell four per cent year-on-year in November 2004 and contracted 1.3pc in July-November. Rising imports coupled with external debt servicing may start testing the relative calmness we see in exchange rates, if not now, then anytime during the April-June quarter.

Published in Dawn, The Business and Finance Weekly, January 20th, 2025