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Analysis: Why a financially stable Pakistan is in US interest
IN recent weeks and months, the US has made no secret of the fact that it is closely monitoring developments in Pakistan, both on the security and economic fronts.
In the past three months, over a dozen statements have mentioned Pakistan specifically or in passing, and in each case, the tone and tenor reflects a level of concern seldom seen in the past.
The latest State Department statement hoped for economic stability in the country, while stressing that Washington was not only aware of Pakistan’s financial issues, but was also backing efforts to rebuild the national economy.
Asked if Washington shared the fear — which many in the country have been voicing — that Islamabad is close to economic collapse, a State Department spokesperson told Dawn the country needed to work with international financial institutions to strengthen its economy.
“To put Pakistan on a sustainable growth path and restore investor confidence, we encourage Pakistan to continue working with the International Monetary Fund (IMF) on implementing reforms, especially those which will improve Pakistan’s business environment,” the US official said.
“Doing so will make Pakistani business more competitive and will also help Pakistan attract high quality foreign investment.”
When a similar question was put to Foreign Minister Bilawal Bhutto-Zardari, he told Dawn: “As long as we are willing to help ourselves”, others would continue to help Pakistan.
“We need to help them help us by taking necessary steps at home.”
The foreign minister noted that at a recent conference in Geneva, the international community had pledged to provide around half of the funds Pakistan needed for reconstruction after the 2022 floods. “Now, Pakistan needs to come up with the other 50 percent.”
The foreign minister also underscored the need to reach a “conclusion with the IMF” and follow up with French President Emmanuel Macron and UN Secretary General Antonio Gutteres’ offer to renegotiate our debt.
To put things into perspective, the State Department official said, “Pakistan’s macroeconomic stability is a topic of conversation between the Pakistani and US governments, including the US Department of State and our counterparts, the Department of the Treasury, and the White House.”
Great power rivalry in South Asia
But why is Washington so preoccupied with Pakistan’s stability, economic and otherwise? Conventional wisdom suggests that the driving factor is our nuclear programme, and that the world cannot afford to see a nation with a nuclear arsenal teetering on the brink of oblivion. But this conventional wisdom only reveals the tip of the iceberg.
“Pakistan is the fifth largest country in the world and the second largest Muslim country – and that too with a large army and an extensive nuclear infrastructure,” says Hassan Abbas, distinguished professor of International Relations at the National Defense University, Washington DC.
“For anyone interested in global stability and maintenance of prevailing international order, economic collapse of Pakistan can be devastating. The US, as a major global power, is naturally concerned.
“Secondly, the US would not like to see Pakistan’s economy collapse while it is steered by a democratic government which is trying hard to normalise its relationship with the US,” he says.
He also makes a point about the great power rivalry in South Asia: “[It’s] nature is such that it is in the US interest to convey to Pakistan that it wants to stay engaged and cooperate where possible, so that Pakistan is not leaning too heavily in China’s direction.”
This view is echoed by John Ciorciari, who teaches at the University of Michigan’s Gerald R. Ford School of Public Policy. He notes that donors such as China and Saudi Arabia may not include many explicit conditions to their aid, but implicit strings are always attached.
“China will look to Pakistan for favorable development opportunities, such as the energy corridor running from the Arabian Sea to China’s western provinces and the strategically vital port of Gwadar. China will also seek Pakistan’s support on geopolitical issues ranging from the Taiwan Strait to Afghanistan and Ukraine.”
Michael Kugelman, who leads the South Asia institute at the Woodrow Wilson Centre, agrees. “The risk of a collapsing economy is a major risk to [Pakistan’s] overall stability. So it’s understandable that Washington would be pulling for Islamabad to come back from the brink and get the economy back on track.
“I’m not sure if the US fears the Pakistani economy will collapse, but I do think it’s keen to do what it can to help avert that outcome-and that includes supporting efforts to get things back on track again with the IMF,” he says.
Kamran Asdar Ali, professor of Anthropology and former head of the South Asia Institute at the University of Texas, Austin, harks back to the historic context to explain why Islamabad’s financial health is of such great concern to the White House.
“The Pakistan-US relationship since the 1950s has been linked with various phases of US security interests in the region: in the 1950s and 1960s, it was closely tied with Cold War politics; in the 1980s the revolution in Iran and the Soviet invasion of Afghanistan took centre-stage. This relationship rekindled in the early 2000s after [the events of] Sept 11, 2001.”
“In all these phases, the US state was closest to Pakistan’s military (and related civilian elite)… it also accepted and supported military regimes in Pakistan, which in turn benefitted from military and non-military aid. With the change in Afghanistan in 2021 and the shift toward a China containment policy within the US, it has clearly shifted its regional preference to India,” he notes.
However, he argues, economic volatility may also mean a less stable Pakistan government which could affect Washington’s most long-term partner in the country, the military itself.
“One can argue that a stable parliamentary system with checks and balances may be the best solution for Pakistan’s economy. Hence, an uncertain future with an economic downturn could lead to a chaotic situation where Pakistan could again become a fertile ground for extremism.’’
Published in Dawn, January 21st, 2023
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