Impact of US election on Pakistan’s economy

For the first time in recent history, Pakistan’s GDP recorded a contraction of 0.4 per cent in 2019-20 (the IMF estimated it to be -1.5pc in real terms). This was despite $3.7 billion received collectively in loans and grants to support the pandemic management efforts. The debts were rescheduled, Saudi Arabia deferred oil payments for three months, China permitted the use of $1bn deposited in the SBP and the IMF disbursed $1.3bn under its Rapid Financing Instrument. The World Bank gave a grant of $500 million, Asian Development Bank (ADB) $350m, Islamic Development Bank $70m, Organisation of the Petroleum Exporting Countries Fund (Opec) $50m and France’s AFG $51m to protect lives and livelihoods and contain the spread of the deadly virus.

The background conversation in diplomatic circles revealed a departure and greater goodwill for the Democratic duo vis-a-vis the Republican Trump team. In Islamabad, Republicans are generally assumed to be warmer towards Pakistan.

Like most other nations that are upset with the United States for acting unilaterally over the past four years, Pakistanis want the future leader of the powerful nation to be more compassionate in the current trying times of the pandemic-induced global recession.

Under President Trump, the United States scrapped the Iran nuclear deal, abandoned the Trans-Pacific Partnership, walked out of the Paris agreement, pulled out of the Human Rights Council and the UN Education and Scientific and Cultural Organisation. He chopped the funding for the World Trade Organisation, threatened to pull out of the North Atlantic Treaty Organisation (Nato) and started the process to withdraw from the Intermediate-Range Nuclear Forces Treaty. He initiated a tariff war with China and administered visa restrictions and cancellations for overseas professionals working there. President Trump’s rigid attitude irked even close US allies. It was hard for Pakistan to put up with the tougher stance of the United States and multilateral institutions in its influence. The drift of the sole superpower towards India when China was investing liberally in Pakistan under the China-Pakistan Economic Corridor (CPEC) tested Pakistan’s skills of diplomacy.

Geopolitics apart, Pakistan desperately needs the resumption of the International Monetary Fund (IMF) loan programme — which was suspended in February — on palatable terms, easing of the Western pressure to scale down the CPEC, clearance by the Financial Action Task Force (FATF), progress on a bilateral investment treaty (BIT) conceived decades back and access to cheap Iranian oil and gas to put the economy back on the rails. It is hard to imagine a more accommodating attitude towards Pakistan if the current US administration secures another term.

‘Republicans were assumed to be friendlier to Pakistan, but now the deep chasm between the United States and China dictates Washington’s South Asia policy’

The harsh stabilisation policies mandated by the IMF’s Extended Fund Facility (EFF) signed in early 2019 already weakened growth drivers with people bearing the crippling burden of adjustments. The management of the grave health crisis entailed a huge economic cost that was partially compensated by dollar inflows from friendly countries and institutions.

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