Pakistan retains safety valve
by K.N. Pandit on 20 Oct 2008 0 Comment

“Officially, the central bank holds $ 8.14 billion (£ 4.65 billion) of foreign currency, but if forward liabilities are included, the real reserves may be only $ 3 billion - enough to buy about 30 days of imports like oil and food,” wrote the Daily Telegraph of London about Pakistan in its issue of 6 October 2008.

US observers on Pakistan make no secret of a grave situation developing there, which the present government in Islamabad calls the legacy left by Pervez Musharraf who quit the office of President last month. The situation has been complicated by the financial crisis worldwide and its inevitable impact on the Pakistani economy, despite tall claims to the contrary.

Armed clashes with Taliban-Al Qaeda insurgents in Waziristan, growing nexus between Afghan refugees and Taliban operating on the Pak-Afghan border, and the growing crescendo of Pakistani terrorist outfits, have all made a mess of administration. Observers predict a dismal future or near future of the Pakistani State.

Islamabad has asked for a $ 100 billion financial support from lending agencies to boost its economy and stop the country falling apart. Whether this money will be forthcoming within the shortest period of time to bridge over the crisis is anybody’s guess. The Saudis have committed to supply 100,000 barrels of crude oil a day against deferred payment, so that Islamabad can tide over her financial crunch.

This is not the first time that Pakistan is in financial straits. She has always been in that situation more or less. American aid in one name or other has generally worked to prop up Pakistan’s staggering economy in the past. Since 9/11, when Pakistan decided to be on the side of the US, Washington has poured in nearly ten billion dollars. Why has Pakistan not been able to stabilize her economy despite all the monies pumped in over six decades of existence? 

Most of the monies have gone to the defence ministry kitty, to be precise, to the Inter Service Intelligence, called “a state within a state.” ISI has a vast agenda - wars against India, subversion in India, financing insurgencies in Kashmir, Sri Lanka, Xingjian, Afghanistan, Nepal, and Bangladesh. Besides, Pakistan’s coffers are used to strengthen home-bred theo-fascism and covert aid to various terrorist organizations and their affiliates across a vast region. 

The Pakistan Army has a developed mechanism of self-generating economy and depends little on the defence budget to bolster its programmes and plans, which are geared to promoting and supporting the financial well-being of her generals in or out of service. It is the Army’s money power that helps it use governments, elected or autocratic, as pawns on country’s chessboard. 

The question arises: is the US in a position to bail out Paksitan’s economy in the current international financial conditions? The US is bogged down in the worst financial crunch since the 1930s. Its impact is already being felt on world markets. This makes America less capable of bailing out Pakistan under the given circumstances. The lending position of IMF and other lending agencies is also not very promising. 

Since its creation in 1947, Pakistan was considered a capitalist bulwark against the expanding communism of the erstwhile Soviet Union. On account of Pakistan’s strategic importance, western countries including the US provided her liberal funding and upgraded weaponry.

Pakistan’s grand opportunity came when the Soviets foolishly launched a senseless attack on Afghanistan in 1979. This paved a way for the Americans to enter the region physically; raised the strategic profile of Pakistan in the eyes of capitalist world as their indispensable saviour; radicalized Pakistani civil society; reinforced the fallacy of Islam’s military and tactical invulnerability, and finally paved the way for Pakistan to receive more funding and ask for much more and not remain content with Zia’s “peanuts.”

9/11 came as a windfall for General Musharraf who, for next eight years, basked in the warmth of American largesse. Washington thought it fine diplomacy to let Pakistanis and the Taliban-Al Qaeda fight among themselves and contributed materially to their old ally, to kill two birds with one stone. US policy planners miscalculated and are now facing the music.

Nevertheless, Washington has little choice between bailing out Pakistan’s dying economy and allowing Pakistan to head towards dismemberment. America cannot afford the second option. Washington US must keep theo-fascism alive or her arms manufacturing industry will face a decline. Pakistan boasts of building a powerful defence mechanism and assault force in the Asian region essentially because of her Indian threat perceptions, which may or may not exist. It means nothing for Washington to maintain balance of power in the sub-continent when her mega-industrialists have to strike huge bargains for supplying military hardware.

The US-China combine cannot afford to let Pakistan go into pieces. They need a bulwark against a rising India in Asia. Only Pakistan has the radicalized manpower to offer suicide bombers, not only in Kashmir but now all over India, as evidenced by the creation of SIMI and IM by ISI. Hence American monies and Chinese arms will flow to terrorist training camps in Pakistan for further dissemination among jihadis.

As a close ally of Saudi Arabia, and sectarian commonality between the two societies, the US has a stake in Pakistan’s survival. A truncated Pakistan will shrink Saudi space in the second most-populous Muslim country. This will be advantage Iran, a country sensitive to Saudi expansion in the Muslim world.

One reason why US is averse to Pakistan’s dismemberment is the possible loss of a moderate segment of Pakistani Islamic society which has been largely instrumental in maintaining the semblance of cordiality between the two countries in times of crisis. A large number of Pakistanis have settled down in the US. Most have expanded their business activities considerably and are an economic and political force to be reckoned with. America would not like to lose their goodwill as they provide her enviable space back in their country of birth.

Lastly, given the tensions between Russia and the US, Washington would not like to leave space for Russian inroads in a weakened and scattered Pakistan. Moscow still nurses ambitions of a link to the warm waters of the Indian Ocean. 

Besides, the Central Asian hydrocarbon reserves have immensely influenced regional strategies. The related question of routes for oil and gas pipelines is vital. The Turkmen-Shanghai and IPI gas pipelines are two major projects, which, if finalized, are bound to leave a deep impact on regional politics. China’s building of the Gwadar port in Pakistan and India’s big naval power expansion are not to be overlooked. Indo-US naval exercises in the Indian Ocean send messages across the globe.

Hence in the final analysis, given the background of Pakistan-US relations and the regional strategies likely to shape the future political map of Asia, it appears that the US will not hesitate to bail out Pakistan from the financial disaster knocking at her door. 

The author is former Director, Centre of Central Asian Studies, Kashmir University

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