‘Pakistani Army is like a hedge fund that is running the country’

Pakistan’s economy has been in the news for almost two years now – rising inflation, food riots, chasing the International Monetary Fund (IMF), selling off national assets and asking friendly nations to boost dipping foreign exchange reserves.

The latest, and possibly the gravest crisis, that confronts Pakistan are the vociferous mass protests that have engulfed the nation over exorbitant electricity bills. The protests which started from Rawalakot in Pakistan Occupied Kashmir (POK) have now spread across the country with people burning the bills in street-level protests. Electricity prices have doubled in just three months while fuel prices have touched all-time highs.

The protests over cost of living take place along with sectarian tensions in Gilgit Baltistan, protests of “azadi” in POK as well as a raging nationalist movement in Balochistan that has the powerful Pakistani Army in its crosshairs.

India Narrative speaks with London-based financial analyst Meerain Baloch to take stock of the Pakistani economy and the impact of a rash of international investment announcements in Balochistan.

Baloch says that there is little hope for an economic revival in Pakistan but China and the Western nations will not let it wither away either. He says that international confidence in the country is very low as bond ratings in the international markets continue to remain at Triple C, “which means that changes of default are very high and there is lack of confidence in the government”.

IN: Do you think interim Prime Minister Anwaar-ul-Haq Kakar, who hails from Balochistan, will be able to manage Pakistan’s economy?

MB: Kakar has nothing to do with Balochistan as he has been nurtured by the Pakistani Army. Nobody knew him till a few years back. He is a puppet in the hands of the army which is managing the economy of Pakistan.

Kakar will find it difficult to salvage the economy as Pakistani agriculture is completely destroyed. Sindh has not been able to overcome the impact of floods from last year and now both Punjab and Sindh are again facing flooding.

The cotton industry lies in tatters over the last five years due to energy and power disruptions, part of which happened due to Baloch fighters destroying gas pipelines. A lot of the cotton industry shifted to Bangladesh over the years.

With nearly 220 million people and a handful of billions of dollars in foreign exchange, Pakistan will find it very difficult to save itself.

IN: Talking about the Pakistani Army, it is an important constituent of the Special Investment Facilitation Council (SIFC) in partnership with the government to invite foreign investment. What is the role of the army in an investment vehicle and do you think this model will be successful?

MB: The decline in the growth and reserves has pushed the Pakistani Army to look for yield elsewhere. The Pakistani Army is more like a family office or hedge fund that owns dozens of portfolios of real estate, cement factories, fertilisers industry, construction and other industries.

The Pakistani Army made fertilizer that was used in making improvised explosive devices (IEDs) in Afghanistan.

The army heavily relied on the aid from the US and other Western countries during the Afghan wars so got a billion-dollar worth of aid.

Now it is after millions of acres of land for agricultural purposes with a 50-50 profit-sharing between the government and the army. This is extremely strange as the only job for any army in the world is to protect the borders and work under the ministry of defence. Although the court has ruled it illegal, I am sure it would eventually be transferred to the army. However, in the case of Pakistan, there’s a state within the state which is more powerful.

IN: Despite the IMF funding, investment by Arab nations and loan rollovers by China, why do you feel the Pak economy is still in terrible shape?

MB: The boost by the IMF has surely helped the country and improved the confidence that domestic investors hold in the short run. But the long run risk still exists which includes high spending, corruption and high double-digit inflation which is close to 28 per cent with slowing growth. Meanwhile, the growth is less than 0.5 per cent at the moment.

However, the bailout agreement is pushing the prices of energy which are already very high for ordinary citizens. The only real effect on the economy will come from the government’s economic policy which does not seem to be changing anytime soon. I feel the 23rd intervention of the IMF is not the last one.

Also, we do not know the terms and conditions of the Chinese loans.

IN: Will the investment by a Saudi sovereign fund in Balochistan help improve the plight of the Baloch?

MB: The investment from the Saudi sovereign fund is merely to look for yield in the higher interest rates economy. I do not think it will bring any positive impact on the People of Balochistan. The Pakistani government has been exploiting the resources of Balochistan since 1952 but the positive impact is zero for the local people. Sui Gas which was discovered in Balochistan is used in every other province in Pakistan but the people of Balochistan do not have access to their own minerals or resources nor do they get any share of it.

I do not think the Saudi investment would be any different than other international investments.

Look at Chinese investment in Balochistan. Has it made any difference? There is no power in the province. There is no railway for trade to be carried out from the Gwadar port. Even the coastal highway is very narrow and does not have the capacity for trade.

Despite the hype over Gwadar, Balochistan is nowhere close to being a trade centre or an industrial area. Balochistan’s only industrial city – Hub that has a lot of industry, is close to Karachi where most of the industries are owned by the army. These include PVC pipeline companies, Fauji cement and marble industry to name a few.