by Ali Salman Andani

The situation within Pakistan’s border is worsening with every passing day. It seems that after slow-poisoning the democracy for the last 72 years, now is the time for this ‘almost failed state’ to taste the consequences of it. A stark warning from Financial Action Task Force on October 18, 2019, must have caused great damage to the morale of Imran Khan administration and to the major stakeholders–after all, when you see your greatest strategy getting exposed on the international stage but you can’t react to that properly is indeed frustrating in many ways.

Warnings Won’t Work

But the FATF could have done more to ensure that the country like Pakistan would consider taking some reasonable action against the terror groups that are operating freely and fearlessly on its soil to organise and sponsor cross border terrorist activities. See, if Pakistan ‘wanted’ to address this issue properly, it would have done that long ago after it was placed on the grey list last year. Unfortunately, it didn’t do anything to address such an important issue. I believe that the Task Force is just wasting its time if it still expects from the government of Pakistan to voluntarily apply strict targeted financial sanctions on individuals, organisations and institutions involved in money laundering and terror financing violations till the latest February 2020 deadline.

Here is the rule of thumb: You hit its bad image and it won’t take it seriously; you hit its crippling economy hard and they will act responsibly.

Sanctions on Pakistan’s financial institutions, I believe, will force the country to fulfil its obligations towards the protection of the international financial system. Now it’s crystal clear that a $10 billion annual loss to its economy as a result of being there on the grey list wasn’t enough to push it to cooperate like a responsible nation-state. I’m indeed not talking about taking strict measures (as we observe in the case of North Korea and Iran), but at least on this stage, the Pakistani government must be given a taste of real financial sanctions, ranging from having weak to medium intensities.

Say, if the banks in Pakistan would have experienced a bit of dither and delay in getting its customers’ international transactions processed owing to the time required to scrutinise them at the intermediary institution level, the government would get a taste of the possible consequences of noncooperation. This way the Task Force would have seen positive results during 3-4 month period ahead of the February 2020 deadline.

For countries like Pakistan, there must be a level between black and grey lists. I still don’t see Pakistan on the list of High-Risk Monitored Jurisdictions (Black List) after February deadline. Its ties with the major world powers are still normal due to its important Geo-Strategic location; to a certain degree owing to its nuclear-armed status among Islamic countries, and very importantly, the country will never hesitate to provide huge favours in return for mere candies, after all, Turkey seems to be quite interested in acquiring nuclear weapons, and China has her eyes on Gwadar port and Reqo Diq gold and copper mines –by the way, Saudi Arabia is also interested in the later. So when it comes to securing votes to avoid getting blacklisted, Pakistan could find the assistance of its ‘so-called friends’ and/or an ‘all-weather friend’ and/or a couple of ‘Islamic Brethren states’.

Stop Lying About The Economy, Mr Khan!

On Saturday last week in yet another deliberate attempt to mislead his countrymen and the world, Prime Minister Imran Khan posted some incomplete and meaningless statistics about foreign investment and current account deficit of Pakistan, and called it an economic turnaround! A 111.5% increase in foreign direct investment in September 2019 as compared to the corresponding month last year (September 2018) could be attributed largely to the $224.6 million in licence renewal fees paid by the Norwegian multinational telecommunication company Telenor that was issued to it fifteen years ago. The total FDI in September 2019 without Telenor’s licence renewal fee inflow actually reduced by almost 12% compared to the corresponding month last year.

Direct investment from China reduced by almost 70% in the first quarter of 2020 (July 2019-September 2019) fiscal year as compared to the same period of the fiscal year 2019. The truth is, since the puppet has been selected as the Prime Minister of the unfortunate 72-year South Asian country, there’s been an overall trend decrease in the direct investment (month-on-month). No sensible human being would see an increasing trend in FDI since Mr Incompetent has been brought to power.

Mr Khan, it’s just hot money coming in after the State Bank of Pakistan announced lately in its September Monetary Policy Statement that it has no intention to change its policy rate, that is 13.25%, for the next two months. And for that reason, public portfolio investment rose 253.2% in the month of September 2019 as compared to the previous month.

The difference in public portfolio investment is humongous when we compare the first quarter of FY 2020 to the same quarter of FY 2019. A sane individual could observe a 321,700 % rise in the short-term Public Portfolio Investment (investment in government’s debt securities) in the first quarter of the fiscal year 2020 as compared to the corresponding quarter last year.

Total quarter to quarter change (Q1: FY19 and Q1: FY20) in total foreign investment – that is 137% – is mainly a result of an increase in public portfolio investment from $0.1 million to $321.8 million.

Mr Khan, the quicker this hot money filters through the economy, the faster it leaves it. It leaves behind it an economy with greater uncertainty and instability than before. And if one properly scrutinises your government’s FY20 national budget, it can certainly be concluded that your government won’t spend this money on the country’s development. Your intentions are written on the wall. After all, there is a reason why your countrymen call you an autocrat! Furthermore, your incapable administration won’t be able to control the inflationary pressure if this hot money will continue to flow in at this pace, and of course, the deflationary spiral at its outflow when a public outcry will force you to do what you never expected in your life! Your country is standing on a verge of an economic collapse and you’re celebrating it.

The way Mr Incompetent’s administration is trying to reduce Pakistan’s current account deficit will hit the economic growth hard in both the short and long term. Imports dropped down by 22.7% in the first quarter of FY20 as compared to the corresponding quarter of last fiscal year. Exports have risen by just 2.37% during the same interval. Large Scale Manufacturing is plunging, and the primary reason for this reduction is high-interest rates, increased taxation and rupee’s sharp devaluation against the dollar that resulted in the fall of aggregate demand for the imported raw materials. With no local substitute of these raw materials, large scale manufacturing sector is suffering since the Khan administration has taken charge. It will eventually skyrocket the unemployment rate and deteriorate the aggregate consumption and thus the aggregate real output.

Azadi March, Food Insecurity & A Revolution.

Imran Khan can be seen begging on his knees in front of Maulana Fazlur Rehman –the President of Jamiat Ulema-e-Islam– as he seems all set to hold a nationwide rally –Azadi March (Independent March)– against Khan’s administration on October 31, 2019.

Maulana is quite clear about his party’s demands. He wants Imran Khan to resign from the Prime Minister’s office and the Parliament to be dissolved so that free and fair elections could be held eventually. He believes that Imran Khan has no real mandate to form a government –in short, Imran Khan is a puppet and the 2018 General Election was a ‘fixed match’. In his view, Khan administration is a bunch of highly incompetent lunatics and is responsible for the ongoing economic crisis. Pakistan Peoples’ Party (PPP), Pakistan Muslim League Nawaz and many other opposition parties are standing shoulder to shoulder with Moulana.

I see the country moving towards a serious food insecurity level. Food security requires both the availability plus affordability of fresh nutritious food. Food prices in the first quarter of FY20 have increased by 15% as compared to the same quarter of last fiscal year. In the same quarter of Nawaz Sharif’s government’s last year (FY18), the food prices got increased by just 1.3% as compared to the same quarter of FY17.

Asian Development Bank’s 2015 data shows that 24.3% of the total population of Pakistan lives below the poverty line. I strongly believe that today this figure must be more than that. Government of Pakistan has still not published 2019 figures. If the figure is close to 30%, let’s suppose, just imagine what must be the total percentage of the population living on the poverty line!

Effects of a 15% rise in food prices would be reinforced by the standstill in the manufacturing sector as it will result in more unemployment. Food insecurity is a real issue, and if it won’t be addressed properly, no doubt, Mr Imran Khan –the Puppet– will witness a Hong Kong, Lebanon, Iraq, Chile, Egypt or Venezuela like uprisings.

Nawaz Sharif has been allegedly poisoned in the jail. His medical condition is extremely serious. The former democratically elected Prime Minister of Pakistan Nawaz Sharif is suffering from acute immune thrombocytopenic purpura (ITP), a bleeding disorder in which the immune system destroys platelets.

Let’s wait and see how fast a prolonged period of galloping inflation, skyrocketing political instability and suppression of the freedom of speech would turn Maulana’s Azadi March into an actual revolution.