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‘Pakistan’s economy is deliberately rigged to augment the country’s vulnerability.’

- Dr. Ashfaque Hasan Khan

January 2023

How can you say that Pakistan’s elite will rescue the country from sovereign default, despite on-going economic slump together with the deteriorating living conditions today? To make it happen, how and from where could the elite arrange such a huge sum of 27 billion dollars?

I don’t know the whereabouts of these 27 billion dollars or who made this calculation and on what basis. I don’t have any idea about it. All I believe is that Pakistan has never defaulted in the past and it will not default in the future as well. A country can default, only if the government of the day, wants to do so. Otherwise, there is no default in the offing. Pakistan is, in fact, exporting about $2.5 to $3.0 billion dollars every month and the similar accounts are coming to Pakistan under remittances. In other words, we are earning $5-6 billion every month. If we can reduce our monthly import bills to this level ($5-6 billion) by importing only essential items, we will be relatively safe. Add a billion dollar in FDI for the whole year plus some money can coming through the Rowshan Digital Accounts plus our borrowing from bilateral and multilateral sources, Pakistan will have no problem in honouring its external debt payment obligations.

Last year (2021-22), Pakistan paid $15 billion in debt servicing. This year it is likely to be around that level as well. If we can take sustainable measures to curtail our non-essential imports and bring our import bills to the level of $5 billion, we will only need money for debt servicing. Pakistan can manages its account provided the government of the day wants to manage. Looking at the ground reality, the government of the day, doesn’t look serious. Over 75 members Cabinet with several ministers travelling abroad on a routine basis, lack of fiscal discipline, no one taking interest in governing the state, with all these the danger of default will continue to hound us.

Therefore, your first point is valid that we are about to default on our debt, however, I do not think that Pakistan will default unless the government wants it to be, because they are in the driving seat and now it is up to them to steer the car into the ditch all along or take it safely to the destination. No doubt, the national economy is in dire straits.

I regret the fact more than I can express in words at this moment in time because when I was at the Ministry of Finance, I played some role in stabilizing the economy of Pakistan. However, today things are going in the opposite direction and all our past efforts have almost gone down the drain. Now with regards to the opposing views held by Miftah Ismail and Ishaq Dar about the possibilities of sovereign default, I don’t want to make any comments because both the Ministers belong to the same party. If truth be told, the leaders of the same party must be able to settle their differences on their own instead of fighting and mortifying each other and washing their dirty linen out in public. We must heed to the grim reality that Pakistan’s economy, particularly from April 2022, has gone through a lot of destruction.

I would even go so far as to say that the economy is being destroyed and corrupted by design. I have also been repeatedly pointing out to the fact that Pakistan’s economy is deliberately rigged to augment the country’s vulnerability in the region so that the global powers that be can push Pakistan down to its knees and keep manipulating and exploiting it for their vested interests. There is of course international politics behind the on-going economic disaster in the country. I don’t want to go into the details, however, things have been messed up and some corrective measures are desperately required to bring the economy back on track.

The current Finance Minister Ishaq Dar says that Miftah Ismail is responsible for the country’s prevailing economic crisis, while a financial emergency may reportedly be declared. Please shed some light on the possible consequences of a financial emergency and how will it affect the common man in general and the national economy in particular?

These kinds of things keep happening in financial emergencies, but frankly speaking, I don’t know its technicalities as to what a financial emergency really is and what it is not. It could be the state when there is no money left in the pocket and a ban is imposed on the import of many things as it is already happening in Pakistan. Importing goods generally require a Letter of Credit (L/C), but when L/C is not opened then it becomes a disaster for the industries and businesses.

Dr. Ashfaque Hasan Khan is currently the Principal of the NUST School of Social Sciences and Humanities and Pakistan’s leading economist. He worked as an Economic Adviser to Pakistan’s Ministry of Finance from 1998 to 2003. In 2003, he served the Debt Office of the Ministry of Finance as a Director General. In 2007, he was appointed a Special Secretary Finance/ Director General at the same office, where he worked until 2009. Dr. Ashfaque Khan was the Spokesperson of the Government of Pakistan on economic issues from 1998 to 2009. He has recently been appointed as the Member of the Advisory Council of the Asian Development Bank Institute (ADBI), headquartered in Tokyo, Japan. The piece is based on excerpts taken from an interview with Dr. Ashfaque Hasan Khan telecast on a private TV channel.

For instance, if you have around Rs.1 lakh lying in your bank account but your monthly expenses are about two lakh rupees, then what will you do? In a similar vein, when the State Bank is left with six billion dollars in reserves, how can people expect the country’s businesses to be run in the same way when the central bank’s reserves were around 19 to 20 billion dollars?

How much damage has been done to the country from April 2022 to December 2022, which you think should not have happened?

I haven’t calculated it yet. However, the reserves stood at 11.4 billion dollars at the end of March 2022, but today it has come down to a meagre 6.1 billion dollars. Interestingly, when the regime change operation against the Imran Khan-led PTI government started in September 2021, we had over $19 billion in reserves and at the end of February last year when the no-confidence activities were at their peak, we had total reserves of about $16.4 billion.

Because of the toppling of the PTI regime, the country’s treasury, in the meantime, has lost over $10 billion and its economic vulnerability has been further exacerbated. If we had these 10 billion dollars reserves in the treasury, we would not have been discussing the threat of sovereign default today. Once again, these things have been intentionally manipulated and corrupted to increase the vulnerability of Pakistan.