Asian Development Bank leaves economically-crippled Pakistan embarrassed
Islamabad: On June 16, the Asian Development Bank (ADB) refuted Islamabad’s claims of agreeing to extend budgetary support to Pakistan. Two senior government officials had claimed that the ADB would give Pakistan $3.4 billion in the first quarter of the fiscal year 2019-20.
The ADB’s Pakistan Director Xiaohong Yang said in an official statement the discussions were still going on and nothing had been finalised yet. This contradicted the claims of Pakistan’s Federal Minister for Planning, Development and Reforms Khusro Bakhtiar and the Prime Minister’s Special Advisor on Economy Dr Abdul Hafeez Shaikh.
The ADB rejecting the government’s assertions has left Islamabad embarrassed, with sources within the Federal cabinet revealing that Prime Minister Imran Khan demanded an immediate explanation for the gaffe.
“The Prime Minister was extremely upset that the deal, which is yet to be agreed with the ADB, was announced beforehand. He feels it was extremely irresponsible of the government officials to do so without any consultation,” a Finance Ministry official said.
Government sources further revealed that besides releasing an official rebuttal to Islamabad’s claims, the ADB officials expressed disappointment over the incident separately too. What has especially irked the bank’s team that was negotiating the deal is the fact that the agreement that Islamabad had announced wasn’t even approved by the ADB’s board of directors. In fact, sources further confirmed that the ADB had categorically told the Pakistani officials that the deal was dependent on the finalisation of the bailout package with the International Monetary Fund (IMF), to be announced in July.
With the IMF set to give Islamabad $6 billion, the touted figure of $3.4 billion from the ADB would cover almost half of the $20 billion-worth debt liabilities for the country.
Despite decreasing by almost a third in the outgoing fiscal year, Pakistan’s current account deficit is still $12.68 billion. The decrease in the deficit is largely owing to the rise in remittances and reduction in imports in 2019.
Pakistan’s economic crisis is epitomised by the plunge of the rupee’s value against the US dollar. In the last week of June, the rupee sunk to 165 against the US currency, signifying a 57% fall over the past year and a half.
Government sources revealed that given Pakistan’s well-publicised multi-pronged economic crises, Prime Minister Imran Khan has decided to appoint a focal person for all future negotiations with global institutes to avoid the embarrassment in the future. The focal person would be responsible for publicising all negotiations with institutions like the IMF and the ADB.
Financial analyst Ikram Houti said 7.2% of the GDP is the budget deficit, which is the highest in Pakistan’s history. “Given the economic crisis, it was extremely irresponsible of the government officials to announce details of the ADB deal without discussing it with them. The much-needed focal person should be someone who understands the economy and knows how international donors work so that no damaging statements are unnecessarily issued.”
Critics say Pakistan’s ongoing negotiations with global institutions has already caused a lot of embarrassment to the country. There has been particular criticism of the way the Pakistan Tehrik-e-Insaf (PTI)-led government dealt with the IMF, going public with its criticism of the fund, and stalling the negotiations for months before reaching a verbal agreement in May.
What observers say has been even harder to understand is the government’s stubborn refusal to mend its ways even when the errors have been pointed out.
Senior financial journalist Mehtab Haider, who attended Khusro Bakhtiar’s press conference where the Federal Minister announced the $3.4 billion deal, revealed that the media had told him that an agreement couldn’t have been finalised before the ADB board’s approval.
“We tried to correct [Bakhtiar] and told him that no deal is possible before the executive board approves it. We even contacted the Finance Ministry but were told by officials that the Financial Advisor will soon give the confirmation. The announcement of an exact figure $3.4 billion is especially damaging given that [multinational banks] don’t want any leaks before things are finalised at their end,” said Haider.
What is even more shocking is the fact that even though ADB officials have revealed that negotiations are underway with Islamabad, no one knows where the $3.4 billion figure has come from. Those negotiating on behalf of the Pakistani government aren’t taking ownership of the number either, given the ADB rebuke.
This is not the first time the PTI government has been left red-faced over a premature claim. Earlier this year, the government had claimed that massive oil reserves were about to be discovered off Karachi coast, with PM Imran Khan claiming that they would suffice in fulfilling Pakistan’s energy needs for the next 50 years.