Bajwa with soldiers near the Line of Actual Control

IMF is balking at Pakistan’s unrealistic budget, but Islamabad feels it can push the lending agency to give it what it wants. US can call the bluff

by Tara Kartha

Decoding Pakistan’s actions can be a difficult game. There are so many intertwined threads and hidden agendas that analysing them can be exhausting. But the task is necessary, especially when this volatile country hikes its defence allocation by a reported 6.28 per cent. That’s a lot for anyone, but especially Pakistan, which has trouble paying its bills. Added to that is speculation that the defence rise is tied to the concessions that Pakistan expects from the US in its policy on Afghanistan. There’s no end to the audacity of Rawalpindi, but that bluff can be called, for many reasons. The cards are simply not falling right.

Defence Budget And Pakistan’s Economy

First, the budget itself. The unseemly brawl during the budget session was bad enough, with mostly treasury benches resorting to violence and name-calling. But the devil lies in the details of those budget papers being thrown around. Actual expenditure for the defence services, which in India covers several pages of detailed information, is so short as to be a parody. The total for ‘Defence Services’ is PKR 1.37 trillion, far more than what the federal government transfers to its provinces. That figure doesn’t include pensions pegged at PKR 360 billion and the Armed Forces Development Program at PKR 340 billion. There are other heads that are opaque, including the Defence Services Miscellaneous and Security Deposits, which runs to more than PKR 184 million. Add all of this up, and the total is far above the stated figure.

Pakistani analysts indignantly point out that the army gets just 1.1 per cent of GDP. India’s entire defence budget is just 2.15 per cent of GDP. And there’s not a bit of use saying India’s GDP is sized at $2,709 billion trillion, almost ten times that of Pakistan’s $263 billion or thereabouts. India is more than twice the size in territory with upwards of 13,000 sq. km in land boundaries to Pakistan’s 7,257 sq. km, and a coastline about seven times more. Besides, we have a fire breathing dragon at our borders. Pakistan has co-opted it, fire and all.

Mysterious Figures And Calculations

Then there are the perplexing figures. For instance, there is a mysterious rise in remittances, which is sustaining the current account balance. It was as much as $14 billion in the first half of FY 2020-21, despite a steep slump in workforce exports from 6,25,203 in 2019 to 2,24,705 in FY 2020. That is supported by data sets from the State Bank, which shows a precipitous drop over this time period.

Pakistan’s own economists express doubts about its claimed 3.94 per cent GDP growth rate. Prime Minister Imran Khan now claims this as 4 per cent and above growth rate. The International Monetary Fund’s sedate prediction? It’s 1.5 per cent. Those are very large gaps in assessments. And here’s the worst news. About a quarter of the budget deficit of PKR 4 trillion is to be financed in part by the International Monetary Fund (IMF) and international bonds.

But as analysts note, the IMF has quietly decided to postpone its review until the government can demonstrate the viability of the budget. In simple words, the creditors are not enthusiastic about Imran Khan’s mathematics. That being the case, the projections for a defence budget rise to such an extent seems dim. Yet, the government powers on in high confidence.

Same Old, Same Old

The reason for high confidence is hardly rocket science. Top US officials like CIA chief William Burns have been visiting recently, at a time when the US is hastening out of Afghanistan. Leaks from Islamabad confirmed the secret visit, with public refusals on any operations from Pakistan into Afghan territory. In fact, so vociferous are these denials that it virtually confirms that there is a great deal of hard bargaining going on in return for Pakistan’s help in delivering its ‘ace in the hole’, which is the Taliban, and arising from that, urgently needed ground intelligence.

The bargaining was apparent in a New York Times story, which reported that Pakistanis wanted prior knowledge of any US attack into Afghanistan, with some Pakistani officials going so far as to say that the US should just hand over the drones to them. That in itself would have infuriated CIA officials. But Islamabad, like Oliver Twist, is never afraid of asking for more. Finance Minister Shaukat Tarin was quoted as saying that US withdrawal from Afghanistan had given Pakistan ‘some space’ in diluting the demands of the IMF. Tarin denied it later, but the position was clear. Even as the IMF balks at Pakistan’s unrealistic budget, Islamabad clearly feels it has the dominant hand to push the international lending agency to give it what it wants. This is not some wishful thinking. After all, this has been the story since the 1980s when the Soviets invaded Afghanistan. In three decades, Islamabad has honed such bargaining into a fine art.

The Crux In Arm–Twisting

The crux of it all is whether the US can call Pakistan’s bluff – which is that it will ‘control’ the Taliban and persuade it to deliver US objectives; primarily eradicating the terror threat, and ensuring a modicum of uniform governance for all. This assumes that the Taliban will act almost entirely on Pakistan’s wishes, providing intelligence on the ground on the activities of al-Qaeda and its many affiliates or competitors like the Islamic State. True, that is almost exactly what the Taliban commanders have done for the last two decades, given the need for safe havens.

But the picture has changed. As victory looms large, differences in power-sharing will inevitably emerge, with indicators already pointing in that direction. A new leadership may emerge that can’t be taken for granted. True, the Haqqanis and the like will still retain their strength in areas bordering Pakistan. But much of the rest, especially in the north and west, is up for grabs.

Meanwhile, Secretary of State Antony Blinken’s meeting with Central Asian leaders indicates the US is scouting for alternative bases. That’s not going to be easy, given that suitable airfields (which means sufficiently remote) are hard to find. Karshi Khanabad in Uzbekistan, for instance, was abandoned after it was found to be polluted with toxic materials including depleted uranium. Kyrgyzstan seems to offer a place to everyone, including India. Kazakhstan is much too far. Turkmenistan has declared neutrality. Besides, none will want to annoy Moscow, or the Taliban.

The advantage is that this time, the US is there not to target the Taliban, with which it has a peace agreement, but to hit the others, for which it is willing to pay in ‘support’ for the future Afghan government. For the US, it might be easier to kiss and make up with Moscow, than ever hope that Pakistan will change its double-dealing nature. Even as Islamabad gears up for the IMF to loosen the strings, India needs to do some hard diplomacy as well as open its purse, to ensure that US objectives are met in other geographies, and that its own Taliban outreach delivers at least the confidence that far more reliable friends are there for the long haul. Pakistan’s ambitious defence budget needs to stay where it is, on paper. That is good for everyone, including Pakistan itself.