Pakistan Making Progress on External and Internal Fronts (Editorial February 2019)

January 2019 has been a month of encouraging progress for Pakistan on external as well as internal fronts, with two big events, that is, Afghan peace talks and the mini-budget, dominating as the talk of the town.

As for the first one, a major breakthrough was achieved in peace talks between Afghan Taliban and the United States, which was made possible only through strenuous efforts on the part of Pakistan in cajoling the Taliban into direct talks with the United States. Although this has been a key demand of the former, the latter had been rejecting that for the past many months. Nonetheless, after much dilly-dallying, the first round of US-Taliban talks was held in Abu Dhabi, in December, which culminated into the next round in the Qatari capital, Doha. Following the six-day negotiations, both sides exuded a fervent hope for a peaceful future of the war-ravaged country. The US Special Representative for Afghanistan Zalmay Khalilizad came out with big news that a “significant progress on vital issues” has been made. “We have a draft of the framework that has to be fleshed out before it becomes an agreement,” he said. Taliban spokesman Zabihullah Mujahid, too, confirmed that the talks “saw progress on vital issues” but that “until the issue of withdrawal of foreign forces from Afghanistan is agreed upon, progress in other issues is impossible.”

This key demand of the Taliban, however, seems to have been met, if ongoing developments in Afghanistan are any guide. US President, Donald J. Trump, has already ordered the withdrawal of half his troops (7,000 personnel) from Afghanistan. The Taliban, too, have agreed to prevent Afghan territory from being used by insurgent groups to stage terrorist attacks. Since the framework agreement is expected to be concluded soon, we can genuinely believe that a full pullout of US combat troops, ergo peace in Afghanistan, is in the offing. Although the beleaguered Ashraf Ghani administration, which is increasingly feeling itself insecure and largely irrelevant to all this process, has tried to create some hurdles – after Doha talks, President Ghani called on the Taliban to “enter into serious talks with the Afghan government” – analysts believe that throwing a spanner in the works by Kabul would be futile as President Trump is narked about the colossal damage this prolonged war is causing to the US economy.

Take, for instance, a recent report “Costs of War” published by Brown University’s Watson Institute which said: “The United States has appropriated and is obligated to spend an estimated $5.9 trillion (in current dollars) on the war on terror through Fiscal Year 2019, including direct war and war-related spending and obligations for future spending on post-9/11 war veterans…”. And, out of this the US spent 1.07 trillion dollars in Afghanistan alone with a further annual spending of 45 billion dollars.

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Amidst all these facts, the only pragmatic and viable option for both Washington and Kabul is to seize the opportunity the talks with the Taliban have offered.

Now, what is in it for Pakistan?

There is no blinking at the fact that a peaceful Afghanistan is the sine qua non for a peaceful Pakistan. Islamabad now should cash in on this remarkable triumph on diplomatic front to give a much-needed boost to its economy. The talk of a free trade agreement (FTA) between the United States and Pakistan has been in the air these days. Media reports suggest that during his recent visit to Pakistan, the US Senator Lindsey Graham discussed the idea with Pakistani officials. So, if Pakistan succeeds in concluding this FTA, in return for its assistance in ending the Afghan war, it would add a powerful impetus to the country’s economy that is in tatters at present, owing to huge current account deficit and a crisis of balance of payments. The incumbent government’s endeavours to steer the economy out of these dire straits need an investment and trade package.

Pakistan, at the moment, is in a pressing need of foreign investment. It has been running pillar to post to attract investments and boost economic activity in the country. And, the recent mini-budget – or the economic reforms package in the words of Finance Minister Asad Umar – which was placed before the National Assembly on January 23, is another step in this direction. With an aim to improve economic activity in the country, the finance minister announced Rs6.8 billion measures to attract investment and to boost industry and agriculture, as well as small and medium enterprises (SMEs). With measures like reducing tax from the 39 to 20 percent on bank income for loans to specific sectors including SMEs, agriculture, and housing schemes, allocation of Rs5 billion for Qarz-e-Hasna for low-cost housing, abolishing withholding tax on banking transactions for filers, doing away with advance tax on cash withdrawal from accounts of foreign remittances, allowing businessmen a carry-forward of capital losses for up to three years, withdrawing import duty on news print industry and offering tax exemptions to attract new investment in Specialized Economic Zones (SEZs) under the CPEC and other industrial units, it is expected that foreign as well as domestic investment will flow into various sectors of the economy. A close analysis of the budget reveals that it is, literally, a fulfillment of government’s promise of reliving almost all sectors of the economy, including industries, agriculture and SMEs. The budget, in effect, focuses on offering incentives to the business community in a hope that with more money placed at their disposal, investment will receive a boost, which Pakistan direly needs at present.

But, these reforms can be fruitful only if there is political stability in the country. It is high time leaders of all political parties shunned their differences in greater national interest and huddled to draw up pragmatic policies for uplifting of the economy. We need to realize that it is a prerequisite for achieving a respected and dignified place in the global comity of nations. Making an apt use of the situation in the best interest of the country is the most pressing need of the hour.