With the nation's economy on the brink of collapse, the new prime minister faces tough choices
Imran Khan must shift from populist to pragmatic
Rarely does a national leader speak as frankly as Prime Minister Imran Khan has this week, but never before has Pakistan faced as grave an economic crisis as is now looming overhead.
After two months in the job, Mr Khan has had time to study the books he inherited from the previous administration and, as he has made clear, they make for disturbing reading.
In the past three years, Pakistan’s total external debt has shot up from $66 billion to more than $95bn and Mr Khan has inherited a record trade deficit of more than $37bn, which has continued to rise, despite three consecutive devaluations of the rupee.
Transparency and accountability were key platforms of Mr Khan’s campaign and, to his credit, he opted for some straight talking in an interview with The National.
Pakistan is facing the worst debt crisis in its history. Without further loans, it will soon be unable to service its debts or pay for imports.
In short, he said, as he headed to Saudi Arabia’s Future Investment Summit, “we’re desperate”. In addition to seeking support from Saudis and other Gulf states, that desperation could drive Pakistan back into the arms of the International Monetary Fund for what would be its 13th and largest loan from the organisation since 1988.
Pakistan’s current budgetary shortfall is in the region of $12bn – twice the size of the last IMF loan in 2013. Asad Umar, Mr Khan’s finance minister, has insisted that this is the last time Pakistan will go cap-in-hand to the IMF.
Certainly, repeated bailouts are not a long-term solution and not a realistic alternative to badly needed root-and-branch reforms of financial institutions and government departments, and a determined assault on corruption.
But while borrowing to pay debt is always a dangerous gambit, Pakistan has run out of options. What matters now is how the government manages the economy in the breathing space provided and how the burden of paying for any loan is distributed among the country’s 210 million citizens.
There is much to be done, and quickly. But, as Greece’s comeback from economic disaster has shown, such apparently hopeless situations can be turned around.
Government spending must be drastically curbed. Already Mr Khan has started to cut government subsidies – despite promises to the contrary, from this month consumers will pay a more realistic price for gas.
He might also be forced to put on hold his ambition to create an Islamic welfare state. As a priority, Pakistan must restore its trade balance, boosting global sales of its main export, textiles, and reducing its reliance on cheap Chinese goods.
It is true that Pakistan’s crisis was created by the corruption and irresponsible spending of previous administrations.
But the measure of Mr Khan’s leadership will be whether he can set aside the populist idealism that put him on the road to office and embrace the pragmatism that Pakistan now so badly needs.