What lessons India needs to learn from Pakistan?
All the friends of Pakistan are disappearing. Pakistan is going through the worst economic crisis, and no one wants to help this country. Slowly, all the ways of helping Pakistan seem to be closing. “Pakistan is not getting a bailout. Pakistan is going through its worst economic crisis in years. Inflation is at a 50-year high, and food has become unaffordable for millions. This country continues to implode.” but why? Why are countries like America, China, and Saudi Arabia afraid to give money to Pakistan? Why is Pakistan standing alone in this crisis? and Why doesn’t any country want to help Pakistan? let’s understand
Where’s the Money?
There must be some such person in your collage group who would say, Brother, give me Rs. 20 today and I will return it tomorrow, but tomorrow never comes. Change the name of that friend on your phone to Pakistan. because Pakistan’s economy also runs like this. Every year a loan is taken, then the interest on the loan increases until there’s no money to pay it, so another loan is taken to pay the interest on that loan. and the general public suffers in this because it doesn’t benefit the general public. Pakistan is addicted to aid, and that’s the core issue.
First of all, let’s talk about how Pakistan earns money. Let’s talk about their budget. Revenue receipts are 9,40,000 crores. Capital receipts are 2,37,000 crores. and external receipts are 5,54,000 crores. And where do the expenses take place? 28.5% of Pakistan’s total budget goes to repaying its foreign loans. That is 3,93,000 crores. and the military gets 1,50,000 crores. In just these two areas, Pakistan spends 40% of its entire budget. So, will there be money left for other tasks? No way; Pakistan takes on new loans to repay these loan installments. Now the IMF knows this thing very well, and despite knowing this thing, the IMF is going to help Pakistan for the 23rd time. But how does the IMF decide whom to help and whom not? There are two parts to this bailout. One is a technical review, and the other is a staff-level review. Pakistan has already passed the technical review.
In 2019, former PM Imran Khan sought a bailout of $6 billion from the IMF, and out of this, $1.1 billion has already been released. but whenever the IMF gives money, then it starts to interfere with your system. brings some conditions. The IMF gave money to Pakistan, but on the condition that you should not use this money in “Revdi politics”. Revdi politics means subsidies and freebies. Often, the government gives subsidies to control the prices of important things. As long as inflation is under control, people are happy, and Imran Khan did the same thing with IMF money. took money from the IMF and wanted to become popular by giving subsidies to people. But here we cannot blame only Imran Khan. because when Shehbaz Sharif became the PM, he continued the same schemes. now IMF lost its cool. They started saying that using our money for politics wouldn’t be entertaining.
Now IMF has become strict. now it said that if bailout is needed, then first accept all these conditions.
- Increase the power price by 10% over December 2021 level.
- Increase the Kafalat beneficiary base. (A schame where families get cash transfer)
- Power sector accounting reforms.
- Strategy to combat non performing Assets in banks.
- Liquidate two private sector banks by May 2023.
- Align crisis management bank resolution with IMF and international good practices.
- Create a central monitoring unit (CMU) within ministry of finance.
- publish an anti corruption framework with input from civil society and experts with international expertise.
Money shall be given only if the condition is accepted. The IMF has said that we should increase the tax base. You have very few people who pay tax, so from where will the money come to pay the next loan installment? You will come again to take a loan, and at the same time, the IMF has also said that inflation should be kept at 5-7% only. the same inflation, which has reached 35% today. If seen from Pakistan’s point of view, there is a well here and a ditch there. To reduce inflation, subsidies will have to be given, which is unacceptable to the IMF, and if existing subsidies are canceled to increase income, people will go crazy. and the IMF knows all this, but they are playing very smartly. It is not refusing to give money, but it is definitely delaying. is keeping such conditions, which may be unacceptable to Pakistan. because they know that Pakistan does not have much time. After a passage of time, they will have to accept all these conditions.
We shall never break this Friendship
Some of Pakistan’s friends are very rich. like Saudi Arabia, the UAE, and Qatar, and they have also helped Pakistan previously. Let’s see how much. Let’s start with Saudi Arabia. In 2018, they gave $6.2 billion just like that in the name of financial support. On top of that, oil worth $3 billion was given as a loan. in 2021 also another loan of $3 billion was given. in 2022 Saudi approved a $8 billion package. Qatar gave a loan of $2 billion in August last year. In 2018, the UAE also gave $200 million as aid to Pakistan. Said to promote small businesses in our country, then, in the next year, 2019, gave a loan of $2 billion. Even the UAE has made such an offer to Pakistan that we are ready to buy the shares of all your government companies, but how can any sovereign country sell the important companies of its country to any other country? From these 3 countries, Pakistan received a total of $24.4 billion in loans and gifts, and that too in the last 5 years alone.
There are also some friends of Pakistan who, not in the form of money but in some other way, have shown their support. but now even they want to stay away from Pakistan. The talk of establishing a gas pipeline between Iran and Pakistan has been going on since the 1990s. The Iran-Pakistan pipeline project started in 1999, and Iran built its side of the pipeline long ago. but Pakistan never built its own pipeline. Now Iran has said that before 2024, finish the pipeline work on your side; otherwise, pay the damages. Iran is going to collect a fine of $18 billion from Pakistan, which is already going bankrupt. The funny part is that India too was going to become a port for this pipeline project, but India got paranoid. If you felt what if terrorists came through this pipeline instead of gas? So we got out of this deal, and in a way, it was good. Otherwise, we too would have gotten stuck today. But all these countries fade away when we talk about Pakistan’s elder brother, China.
The Biggest Goon
Pakistan has taken maximum loans from China’s commercial bank. If we talk in numbers, Pakistan has taken a loan of $30 billion from China. Out of this, a major portion was for the projects of the CPEC, or China-Pakistan economic corridor. but China is super smart. They gave money to Pakistan but said that all these contracts should be given to a Chinese company only. Only Chinese workers will work here. in fact, keep all the money you use for CPEC in a Chinese bank only. means China has an all-out advantage. their company gets profit from their money. Jobs are created for their people, and our presence also increases in another country.
So What’s the Problem?
Now, the different parties that have helped Pakistan in the past did so for three broad reasons. One is on humanitarian grounds, such as those of the IMF, so that there is regional stability in Pakistan and a civil war doesn’t erupt. The second reason is common interest. Saudi, Qatar, Turkey, UAE, Iran are Muslim countries and Pakistan too, so naturally they want to help their brother. And the third reason is for pure economic reasons. This is what China does: seeing profit, it invests money. The biggest problem for Pakistan is that all these reasons are getting erased. China is slowing down its CPEC operations. After the pandemic, the whole world has lost faith in China. and its impact is also having an impact on China’s economy. So China is not giving more money to Pakistan in the name of CPEC. Turkey and Iran no longer trust Pakistan. and Saudi Arabia is upset with Pakistan. Pakistan did a stunt under Imran Khan. Qatar, Turkey, Malaysia, and Pakistan tried to form the Avengers by joining four such countries. means they tried to form a new alliance. but they kept Saudi Arabia out of this. Saudi Arabia did not like this thing at all.
Now Saudi Arabia has said that earlier we used to give loans and aid without conditions. But now the time has come that the countries that take money from us should first start fulfilling their promises. this a warming for Pakistan. Due to the non-fulfillment of previous promises, now even the IMF is hesitating to give money. Recently, news came that the IMF approved a loan of $15.6 billion for Ukraine. America printed $300 billion overnight to save Silicon Valley Bank. The IMF and the Western countries have different priorities, which we now understand. and countries like Pakistan and Sri Lanka do not come under these priorities.
Lessons for India
What lessons India needs to learn from Pakistan?
- The First Lesson: There are no free gifts. Looking at the economic condition of Pakistan, there is absolutely no need for us to laugh. In fact, we should focus on improving our own economy. If we look at our budget, we cannot even meet our expenses with tax revenue. We are short on money, and we borrow 40% of the money every year. These are not bailouts like in Pakistan; they are bonds in which mostly citizens of our country invest. But the point is that India does not earn enough money to cover all its expenses. We have to pay interest on these loans, and this is the biggest part of our budget. The money that can be invested in the nation’s development goes only to interest payments. Devastating floods happened in Pakistan in 2022. They were called the worst floods in a century. Due to these floods, Pakistan’s economy faced problems. If India faces a natural calamity of this magnitude tomorrow, it too might not be left with that much money. It is said that loans steal the resources of the future. If we spend tomorrow’s resources today, then tomorrow we will not have money left.
- The Second Lesson: We have to get out of the cycle of poverty. The IMF is now dealing strictly with Pakistan because of Pakistan’s poor track record. This Diplomat article says that whenever a new government comes into Pakistan, their first move is to take the bowl and go to other countries and beg for help. Pakistan today is stuck in a vicious cycle. Due to problems in the country, there is poverty in it. If people are poor, then money does not come from taxes, so they have to take loans from the IMF. To keep these poor people happy and temporarily calm them, this loan is spent in the form of subsidies. But does this reduce poverty? no way. When will we learn that subsidies are a temporary solution like a Band-Aid? India also gives away free water, free electricity, and free rations. but corruption eats up all its benefits. and poor people remain poor. India is not different from Pakistan in this matter; it is just a lucky thing that we have some very big industries. People who pay salaries are honest; they get money only after deducting taxes. This is the working class of the country that runs the country and takes the responsibility of 1.4 billion Indians on its shoulders.
- The Third Lesson: We have to increase our income. income means revenue for the country. need to focus on manufacturing. Whenever we go shopping, we definitely see one thing: where the product is made. Before the pandemic, everything used to come from China; now the situation is changing. Things made in China are decreasing, but where are these things manufactured? not in India, but in Vietnam. I think our manufacturing sector is so shattered, so broken, that we find it cheaper to import from some other country. My personal endeavor is to find as many Indian products as possible and only buy them, so that an Indian company gets maximum revenue. From tourism to pharmaceuticals to clothing, India has to get better in all these industries. Money from outside has to be brought to India, and most importantly, we need to see how to keep India’s money from going out of India to the lowest.
Because today no one wants to help Pakistan and there is no need for India to be happy for this. on the country we have to show concern. one has to become self-reliant and move forward on one’s own. because “Only a fool learns from his own mistakes, a wise man leans from the mistakes of others.”