Hambantota in southern Sri Lanka was home to deposed President Gotabaya Rajapaksa after the recent crisis until he was forced to leave the country entirely. This continues the trend of the city, and especially its strategic deep-water port, to be in the news for all the wrong reasons. In 2017, when Sri Lanka struggled to pay off its debt on time, it sold a 99-year lease on the port to the Chinese company that built it for quick cash. Numerous analysts and writers have written articles pointing to Hambantota as evidence A in the theory that China deliberately plunges developing countries into a “debt trap” by offering loans to finance extravagant infrastructure projects.
Likewise, many analysts and writers have warned that the same fate could befall Pakistan, where the Chinese authorities have been heavily involved in investment projects since 2015, especially in the China-Pakistan Economic Corridor (CPEC). is investing in Gwadar, a deep water port in Pakistan’s southwestern province of Balochistan, which serves as the epicenter of CPEC in Pakistan. Thus, the news about the port of Hambantota is causing alarm in the corridors of power in Pakistan. Some feared that if Chinese influence in Gwadar increased even further, it might follow the lead of Sri Lanka’s port for all the wrong reasons.
Today, the current political and economic situation in Sri Lanka has deteriorated significantly, leading to the country’s default on debt payments. Due to the lack of basic necessities, Sri Lankans broke out in mass protests. And it is unlikely that the crisis will be resolved soon, even though the protesters forced Rajapaksa to leave. He was replaced by Prime Minister Ranil Wickremesinghe, who is also unpopular with the masses and seen as a symbol of the political status quo.
Once again, Pakistan (among other developing countries) has been the subject of debate in light of the deteriorating situation in Sri Lanka, with questions about whether the country can follow the same dark path.
Undoubtedly, the Pakistani economy is also in an unsatisfactory state, and it is currently getting worse and worse due to political uncertainty. There is gross unemployment and the inflation rate has risen sharply. Among other things, The News, the English national daily newspaper in Pakistan, informed Recently, the value of the Pakistani rupee against the US dollar has depreciated by more than 4,100 percent, from Rs 4.76 per US dollar 50 years ago in May 1972 to a whopping Rs 200 per dollar on May 18, 2022. The Pakistani rupee continues to decline against the US dollar and stands at 225 per dollar at the time of writing, further exacerbating the country’s economic woes amid shrinking foreign exchange reserves.
Like Sri Lanka, Pakistan has welcomed Chinese investment to support its ailing economy. This is why some analysts argue that massive Chinese investment in Pakistan has brought the country to the brink of economic collapse. But this narrative is an exaggeration: most of Pakistan’s problems, especially its economic problems, are the result of its own mismanagement, lack of planning, political uncertainty and, above all, deteriorating relations with neighboring countries that have had traditionally good relations with Pakistan.
An example is the recent government of former Prime Minister Imran Khan, which came to power in 2018, allegedly with the support of a powerful security agency. During his tenure, which came to an abrupt end in April 2022 due to a vote of no confidence in Parliament, Pakistan’s relations with both Saudi Arabia and Turkey deteriorated. Traditionally close friends of Pakistan, the two countries have previously stood by Pakistan through difficult times. Meanwhile, China, Pakistan’s all-weather friend, was unhappy with the progress in CPEC projects, which had slowed down under Khan’s rule. Thus, as the economic crisis in Pakistan began to deepen, the friends of Islamabad were less inclined than usual to provide financial assistance.
Perhaps most notably, Pakistan’s ties with the United States have deteriorated sharply. Washington remained furious over Pakistan’s role in supporting the Taliban in Afghanistan, to the point that US President Joe Biden did not call Khan after he became president. The slide down did not stop there. Khan went even further and visited Russia in February 2022, which should have angered the US — that was the day Moscow launched its invasion of Ukraine.
When he was ousted in a vote of no confidence in Parliament, Khan also blamed the US for his downfall. In the media and at public meetings, he claimed to be the target of a US conspiracy to remove him from office. Khan’s strategy was to stir up anti-American sentiment in Pakistan in order to gain votes and win over his political opponents, and it worked. In the recent by-elections in Punjab, the country’s most populous province, his party won the majority of seats thanks to his fiery speeches and the spike in inflation that began during his reign.
First of all, the powerful Pakistani security institution has expanded its role and influence in all sectors, including politics. It is common knowledge in Pakistan that governments come and go with the approval of the military. But the heavy hand of the security forces led the country to a dead end, preventing it from following the path of development. Most of Pakistan’s problems, including its economic and political uncertainty, stem from this issue. For example, Pakistan’s security-focused approach to nearby terrorist groups has pushed the country onto the Financial Action Task Force (FATF) greylist, with economic consequences. Successive governments have struggled to get Islamabad off (and out of) the greylist.
On the other hand, Islamabad’s new government, led by Prime Minister Shehbaz Sharif, has been facing many challenges since the economic crisis. Due to the prevailing economic problems in Pakistan, Sharif’s government is negotiating with the International Monetary Fund (IMF) for $2 billion in aid. However, if the current political uncertainty further intensifies, it will be quite difficult to get this package from the IMF. In order to secure the loan package, Pakistan is reported to have taken several steps to cut its spending, raise energy prices and improve tax collection, as required by the IMF. But these actions are unpopular with the population and could lead to another change of government this fall, when elections are due.
Moreover, Pakistan has a long history of turning to the IMF when economic problems get dire. His repeated requests are proof that this is not a long term solution to Pakistan’s economic problems.
As the economic crisis continues to unfold, the parallels with Sri Lanka are becoming more troubling. Like Sri Lanka, Pakistan is facing a growing shortage of foreign exchange reserves, limiting its ability to import basic necessities such as food and fuel. And, as in Sri Lanka, these economic upheavals are setting fertile ground for political strife. If the economic situation worsens, mass protests and a leadership vacuum could also begin in Pakistan.
Prominent Pakistani commentator Zahid Hussain is one of those who warn that Pakistan must act now to avoid the fate of Sri Lanka. “Which led to the economic collapse of Sri Lanka, obviously. Due to the lack of foreign exchange, the country was not able to pay for the import of even essential goods such as fuel. In fact, the crisis has been accumulating for many years, as the country has been accumulating external debts to melody or 51 billion dollars” he wrote for dawnPakistani daily newspaper.
“…Many developing countries, including Pakistan, are in a similar predicament. We may not be in the place of Sri Lanka yet, but not that far as there are some similar symptoms.”
Unfortunately, mundane realities tell us that Pakistan is gradually and slowly slipping into terrible economic and political instability. If Pakistani politicians continue to ignore warning signs, as they have always done in the past, the situation could lead to a crisis similar to the one unfolding in Sri Lanka. It is time for Pakistan to swallow the bitter pill of tough economic reforms before it is too late.