MUMBAI: Imran Khan’s economic vision for Pakistan is alluring. The party backed by the country’s former cricket hero and likely new prime minister won the most votes in Wednesday’s election. Khan wants to fight corruption, reform government spending and improve the lives of the poor. Given the demands that are likely to come with any bailout of the $300 billion economy, that’s fanciful.
Khan’s ambitions echo those of Pakistan’s larger neighbours. Chinese President Xi Jinping has led an aggressive anti-corruption campaign and India’s Narendra Modi was elected with a similar pledge. Khan has a weaker mandate, needs to form a coalition, and has fewer financial resources at his disposal.
Indeed, Pakistan is heading for another financial crisis. The World Bank sees the economy growing at just 5 percent in the current fiscal year. Foreign exchange reserves cover barely two months of imports in a country that depends on foreign energy supplies. The central bank has raised interest rates by 175 basis points this year and the rupee has been devalued four times since December.
A plan to increase welfare spending more than four-fold is unlikely to be implemented if Pakistan seeks support from the International Monetary Fund. The country has tapped the fund more than 10 times in its history.
Capital Economics reckons any support package will require the rupee to fall by another 10 percent by the end of the year, and interest rates to rise another 100 basis points. Rival potential saviour China is partly responsible for the country’s current predicament. The large infrastructure projects that form part of its Belt and Road programme have driven up Pakistan’s imports.
Even if Khan’s hands weren’t tied financially, he would still be politically constrained by the military, which is widely suspected to have helped the new leader come to power in an electoral process criticised by observers from the European Union and the United States. It’s hard to see how he can keep the army happy while trimming the nuclear state’s defence budget and finding common ground with neighbours. Khan’s ambitions for Pakistan look well beyond reach.