Pakistan: More savings – or more welfare?

A new Pakistan has promised the newly elected prime minister Imran Khan to his compatriots. They have had enough of the corruption and the nepotism of its predecessors.

Pakistan: More savings – or more welfare?
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    In Pakistan was elected at end of July. Premier Imran Khan must redistribute power, many parties have influence. What does it follow for country? Christian Wagner is researching Science and Politics Foundation (SWP) on South Asia. The foundation advises Bundestag and federal government on all issues of foreign and security policy.

    The former cricket star has promised Pakistaners a lot: modernising an Islamic welfare state, more jobs, education and health, and strengning fight against terrorism. Comprehensive reforms, refore, that Imran Khan, now that he and his party Movement for Justice (Pakistan Tehreek-e-Insaf, PTI) were successful in parliamentary and provincial elections in Pakistan, must be implemented. He wants to create a "new Pakistan" (Naya Pakistan) that deals with corruption and nepotism of former governing parties.

    But that will be hard. First, it must forge a viable government coalition. Secondly, impending balance of payments crisis will necessitate tough domestic policy reforms. Externally, it also weighs on relationship with two most important international partners, USA and China.

    Khan's PTI was able to win only 115 of 272 direct mandates in election on 25 July, and does not yet have a majority in new parliament. The future prime Minister must refore bring many independent candidates and a number of small regional parties from provinces of Sindh and Baluchistan to his side. Delays in formation of government also arise from massive criticism of conduct of elections. Many parties have criticized influence of security forces on candidates and media in favor of Khan and his PTI. The Electoral Commission refore recounts votes in 70 constituencies and thus in a quarter of voting districts.

    The IMF wants to know about China

    In addition, top candidates like Imran Khan have often won several constituencies. However, since y can only accept one seat, or constituencies must be elected again. It must also be chosen in two constituencies in which results had not been elected, as well as in two circles in which result had to be annulled; There minimum quorum of ten percent of female voters was not reached. Khan's government will probably only be able to rule with a narrow majority and also has no majority in Senate.

    Internationally, new government will probably have to go back to International Monetary Fund (IMF) to avert an impending balance of payments crisis. The increase in oil prices has significantly increased import bill in recent years. Exports, on or hand, did not grow to same extent, so that foreign exchange reserves have shrunk considerably. If IMF were to jump into breach, Pakistan would be 13th and largest aid programme to date, with an estimated volume of around 12 billion US dollars.

    The magnitude of balance of payments crisis is making a fundamental overhaul of public finances inevitable. Khan's government will have to expand tax base and limit government spending and social programs. There are new ideas for long-term solution of balance of payments deficit, such as creation of a sovereign wealth fund to privatise a number of deficit-state enterprises in medium term. Such measures are unlikely to meet expectations of its constituents of a new Pakistan.

    The passage to Monetary Fund could become a first foreign-policy test for new government. The IMF will demand from Islamabad disclosure of all financial commitments, including those from Chinese investments in China Pakistan Economic Corridor (CPEC). The lack of transparency in Chinese investment, especially long-term financial constraints associated with it, was repeatedly criticised by opposition in Pakistan.

    Updated Date: 09 August 2018, 12:00

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