Zeeshan Salahuddin
Usama Nizamani
InferTalks Spotlights Climate Change, Pakistan’s Debt Crisis
By Elaine Pasquini
Washington: Pakistan’s debt crisis is completely unsustainable, according to Zeeshan Salahuddin of Tabadlab, an Islamabad-based advisory services consulting firm. “The manner in which we are accumulating debt, the quantum of interest payments that we have to do and our perennial inability to both control our fiscal account as well as our current account and inability to increase remittances or exports…is effectively causing us to borrow constantly.”
Salahuddin made these remarks in a wide-ranging conversation with research journalist Usama Nizamani on the March 28, 2024, episode of InferTalks, a digital platform offering news and insights on global issues.
In addition, other crises are now forming including the security situation and climate change. Noting the horrendous floods of 2022, he recalled the $33 billion in both damages and rebuilding costs, which is effectively 11 to 12 percent of Pakistan’s GDP. All of these issues “should be an absolute alarm bell” for anyone who is working on finance, the economy, or the debt crisis in Pakistan, Salahuddin stated. “The manner in which we are managing Pakistan’s debt is completely unsustainable and we need transformative changes across the length and breadth of our policy landscape for us to be able to manage it.”
Asked what kind of “habits” on the part of the government have exacerbated Pakistan’s debt crisis, Salahuddin responded that there is a constant reliance on debt as a driver of growth. While this practice is normal and happens around the world, in Pakistan’s case that growth is “not productive,” he pointed out. “It is not industry-focused. It is not export-oriented. When we get additional money, we don’t use that money to enhance industrialization…to enhance exports.” Instead, Salahuddin said, Pakistan is a consumption-focused, import-addicted economy with one of the highest consumption rates in the world.
If any major reforms are made by the new finance minister, Muhammad Aurangzeb, including removing the anti-export bias and managing consumption, “I have high hopes…of some kind of change happening that would allow Pakistan to steer its way out of the current crisis,” he said. As it currently stands, Pakistan will inevitably go towards the country’s 25th International Monetary Fund bailout.
Climate change is a major concern for Pakistan, which is part of the Global South that does not produce most of the greenhouse gases that have brought about climate change, but are “affectees” of it, Salahuddin argued. “The vast majority of the pollution conducted in the world – the greenhouse gas emissions – actually come from the Global North which comprises the EU, Canada, the US, Australia and more recently, China, and even India.”
The issue of loss and damage – the idea that countries that have suffered the consequences of climate change despite climate change not being of their making and therefore should receive some compensation – has been accepted. Pakistan’s former climate minister, Sherry Rehman, was at the forefront, along with German Development Minister Svenja Schulze, of leading the fight for the Loss and Damage Fund at COP 27. The fund was formed and now holds some $792 million that can be distributed to countries that need it, Salahuddin related.
But that is not enough, he pointed out. “Our National Climate Policy and the World Bank report state that Pakistan needs more than $200 billion between now and the end of 2030 for both our climate transition and our adaptation efforts. And not to mention that we will continue to have droughts, heavy rainfall, floods and heat waves that will wreak havoc on our infrastructure, lives, and livelihoods. In the last devastating floods, 12,000 people were injured and 1,753 died.”
Pakistan’s debt crisis inevitably exacerbates Pakistan’s climate crisis because the country’s interest payments and debt repayments are so high there is not enough money to provide protections against climate change. “It’s a downward spiral that keeps getting worse and worse as time goes on,” he lamented.
Addressing the terrorism issue, Salahuddin noted that since the unilateral breakdown of Pakistan’s peace agreement with the TTP (Tehrik-i-Taliban Pakistan) in November 2022 there has been a dramatic escalation in attacks across Pakistan.
The TTP, responsible for most of the attacks inside the country, has matured into a “much more centralized…structured, focused, governance-driven organization than just your run-of-the-mill terror group that wants to just create havoc and cause problems,” Salahuddin said. “Predominately their focus is on security agencies, law enforcement, paramilitary and military targets.”
With respect to the security situation on the Afghanistan-Pakistan border and the Afghan Taliban’s response to Pakistan’s concerns, Salahuddin noted that their response has been very “lackadaisical,” and Pakistan no longer seems to have any kind of leverage as far as the Afghan Taliban are concerned. “Those old mechanisms that we used to sort of force the power centers in Afghanistan to do our bidding no longer work.”
The Taliban’s top leadership believes that they are the most powerful they’ve ever been, that they are untouchable, and that anyone who comes to Afghanistan to displace them will be “buried in the mountains,” he added.
“But one thing that absolutely cannot stop and should continue unabated is conversation,” he insisted. “Dialogue, discussion, and discourse are definitely the way forward. Any kind of a stall in that process only leads to further problems down the line.”
Regarding Pakistan’s relationship with India, Salahuddin argued that with India having gone from being the tenth largest economy in the world to the fifth and soon to be the third, the Pakistan-India relationship will not normalize. And with Modi most likely winning in India’s upcoming election, for the next four to five years the relationship is not going to thaw, and India and Pakistan are going to remain roughly where they are. “I would say for me it’s a bit of a fool’s errand to try to focus on India as much as we do,” he concluded. “I think a better idea would be to focus our efforts and energy on fixing a lot of our internal problems.”
(Elaine Pasquini is a freelance journalist. Her reports appear in the Washington Report on Middle East Affairs and Nuze.Ink.)
