Pak political crisis could impact CPEC, economic growth

By Mahua Venkatesh :

NEW DELHI

THE current civil war-like situation in Pakistan may deal a blow to the execution of the ongoing China Pakistan Economic Corridor (CPEC), a collection of mega infrastructure projects, and thereby dent its economic revival process. Opposition parties in the country led a joint rally protesting against Prime Minister Imran Khan’s “puppet” Government and the Army. Besides, the Financial Action Task Force (FATF) has also ruled against taking Pakistan off the ‘grey list’ and gave Islamabad time till February 2021 to comply with its 27-point action plan.

The move will further impact its already battered economy, even as the spread of the coronavirus pandemic was contained. Khan has repeatedly highlighted the need to complete the $60-billion CPEC saying that it would push socio-economic development. Pakistan’s GDP growth crashed to below 1 per cent in 2019. This year, the country’s growth could even witness a contraction. Former Indian envoy to Pakistan, T.C.A. Raghavan told IndiaNarrative.com that the current political turmoil is likely to continue “for some time”. “It is true that the country is currently heading towards a political crisis and it seems that it will continue for some time,” he said. “Pakistan’s economy has been in a critical state and this will further dent the situation, including the execution of CPEC.

The CPEC has been slowing down for various reasons and the existing crisis will have its own implications on the projects,” Raghavan said. According to the US Institute of Peace, “political upheaval, a violent insurgency fed by the war in Afghanistan, and the inability of successive Governments to carry out reforms are to blame for this decline”. “Today, a polarised political environment and elite intrigue among civilian, judicial, and military institutions has made sustainable economic growth and reforms that much more unlikely.” It further said that the global outbreak of the coronavirus pandemic has further made it challenging. Pakistan’s headline inflation in September stood as 9 per cent.

“The current political turmoil will definitely dent the country’s the economy. For any economy to grow, political stability is critical and there seems to be no solution in sight,” Shakti Sinha, director at the Atal Behari Vajpayee Institute of Policy Research and International Studies.