Advocate Muhammad Hamza Qamar (Scholar of Law)
Asia pacific region remains world’s growth engine despite the weathering effects of Covid-19 and stringent waves of global climatic fluctuations. The regional dynamics has been a focal point since the Asian economic giant China has been engaged in expanding regional trade routes and supply chains with its initiatives like Belt and Road Initiative (BRI), connecting the region with silk-route, etc. Asia pacific venture has taken a more serious direction since the US president Joe Biden launched the Indo pacific economic framework (IPEF) earlier this year. IPEF’s prospects and evolution will partly hinge on how U.S and its regional friends and partners define its value addition in a competitive landscape. Since it is a widespread notion that the initiative taken by Biden administration is to counter the growing economic clout of China in the Asia pacific region. Providing its four founding pillars ; trade, supply chains, clean energy, decarbonisation and infrastructure, tax and anti-corruption, the framework has engaged dozen of its regional partners including Australia, Indonesia , Brunei, Japan,India , Republic of Korea, Malaysia, New Zealand, Thailand , Philippines, and Vietnam. Together they represent almost 40% of world’s GDP.
IPEF is ostensibly created to encourage regional economies to “decouple” from the Chinese market by providing them alternative supply chains, that is believed by Washington will help in exclusion of China from the regional trading and supply systems. Since the growing hostility in region’s economic framework, the prospects of Pakistan are quite crucial as well as require shrewd handling. The counter strategies of US has left the Pakistan out of ambit since India is a part of US chain and supply framework and does not include Pakistan. Pakistan has taken the heavy toll of Covid-19 as well as the recent floods has taken aback the country twenty yearsof its economic development. Seeking the bailout plan of IMF, the growing inflation rate has pulverized the shellacking economy. China’s belt and road initiative accolades the Pakistan with widespread infrastructure, vying for economic stability and inclusion. However considering the recent economic crisis of Sri Lanka which has brought in untold misery & economic hardship to the general public, concerned ministries/ authorities in Pakistan shall reevaluate the possible consequences before seeking loan from China as well as IMF. The general malaise regarding poor economic policies of consecutive governments have rankled the situation. Political mudslinging, somnolent leadership and mishandling of foreign loans are few common grounds which Pakistan share with Sri Lanka. In order to scuttle away this malfeasance, policy makers must quell the urge to seek excessive loan programs from donor countries i.e. China, US and IMF. Impact of Covid-19 on the economy of Asian countries especially on South Asian countries has been stringent. IMF has released GDP data for 2022 which shows GDP in positive figures but yet most promising countries few years back are currently faltering on their promises. Pakistan’s GDP growth rate as per IMF is 4. Although enough strict measures are taken by government to contain current flaccid fiscal situation, bitter medicines are yet to come. But with changes in its revenue generating model, IMF bailout packages and assistance from its all weather friend China and legacy friend Saudi Arabia, Pakistan is expected to tide out this difficult time safely.
China’s GDP projection for 2022 as per IMF is 4.4, which is quite low as compared to its past performance and recession in its construction/ real estate sector has taken toll on its economy. Yet financial assistance from China will prove helpful for Pakistan. Saudi Arabia (SA) whose economy is based on oil and tourism has overtaken China in its GDP rate for year 2022 prediction with 7.6 rating. On August 5, the foreign currency reserves held by the SBP were recorded at $7,830.3 million, down $555 million compared with $8,385.4 on July 29, data released by the State Bank of Pakistan (SBP) on Aug 11 showed. While forex reserves are dwindling, fluctuation in petroleum prices in the international market and exchange rate variation, has forced government to revise the existing prices of petroleum products to pass on the impact to the consumers. Saudi Arabia is providing Pakistan with $4 billion assistance while an agreement has reached with International Monetary Fund on August 29, 2022. The efforts will have cumulative positive effect on Pakistan’s financial infrastructure. With more engaging and austerity measures, economic inflows will strengthen the financial infrastructure in Pakistan. Also it will help stabilize the market and industries. Foreign funding will increase, thereby, generating a “domino effect” of strengthening the economy in long run.
Measures such as increase in taxes, cost cutting in government budget, increase in petrol price are many of such harsh measures that are required to be needed, in order to gain stability. In order to get in Indo pacific economic run, there’s a dire need to set an inclusive economic strategy. The linchpin of which is to extend economic ties across borders and staging a favorable home front for supply and trade routes to attract foreign economic pool. The need of the hour is to amortize the debts of country and providing the alternate trade networks to boost the local economic front.
Also Pakistan need to revisit its economic policy towards its neighbours including India, Iran and Bangladesh, instead of solely relying on China. Bilateral trade routes on the lines of Comprehensive Economic Partnership Agreement (CEPA) must be pursued as CEPA will allow both India and Bangladesh to fill the trade fallout gaps. CEPA is also likely to reshape the Asian future trade connectivity through Asian Highway Network (AH-1 and 2) which will produce a cluster of connectivity. Hence, Pakistan must cut short its over dependency on foreign loans, allowing only in sparingly manner, and engage more in regional trade routes and supply chain networks along with enhancing ground capabilities to grasp firm foothold.