Imran Khan gets squeezed between shrinking economy and proactive opposition

Prime Minister Imran Khan, who has been facing sharp attacks from a combined opposition alliance for months, is facing trouble convincing China for concessional funding of the grand project to upgrade a little less than one-fifth of Pakistan’s railway tracks at a cost of $6.8 billion. The Main Line 1 project, the costliest projects of the China-Pakistan Economic Corridor, had been reckoned by its proponents to boost Pakistan’s economy and reduce unemployment.

But there are serious disagreements between China and Pakistan on its funding that have led the two countries to repeatedly put off the annual meeting of CPEC’s Joint Cooperation Committee, its key decision-making body. The committee is jointly chaired by Pakistan's minister for planning, development and special initiatives and the vice-chairman of China's National Development and Reform Commission.

According to a Nikkei Asia report, Pakistan wants to borrow at a concessional interest rate of less than 3% - some reports in Pakistani media say 1 % - but China has offered a mix of concessionary and commercial loans for the project. Pakistan’s Express Tribune in November said China also wanted additional guarantees before sanctioning the $6-billion loan due to the country's weakening financial position.

Pakistan watchers in New Delhi said the two countries would eventually resolve their differences over the funding closer to China’s position. But they said the episode spotlights the growing pressures on PM Imran Khan on the economy front that would continue to weaken his grip on the country.

A security assessment by the UN’s department of safety counts the economic slowdown as PM Khan’s biggest domestic challenge.

“As economic hardships deepen, the PDM movement is likely to gain broad public support. If the economic situation is not properly controlled, Pakistan will face political instability with growing risks of government collapse,” the UN department’s report said, referring to the campaign against PM Khan launched by Pakistan Democratic Movement (PDM), an alliance of opposition parties formed in September 2020.

The state of the economy and an increase in unemployment have been key points in the narrative put out by the joint opposition that has announced the third round of protests across Pakistan.

The seizure of a Pakistan Airlines aircraft owing to a dispute over non-payment of aircraft lease dues feeds into this narrative over the economy.

“Today Malaysia has stopped our aircraft in lieu of loan repayment. Tomorrow if any airport detains the Prime Minister over non-payment of loans…what will happen?” Maulana Abdul Ghafoor Haideri of Jamiat Ulema-e-Islam party said in a recent video clip.

That the authorities in Malaysia decided to seize the aircraft is a significant development and signals the state of play in bilateral relations between Islamabad and Kuala Lumpur, which was considered to be part of the Pakistan-Turkey-Malaysia axis before ex-PM Mahathir Mohamad’s exit.

Pakistan’s relations with countries in the Middle East have also deteriorated as Imran Khan lay his bets on Turkey’s Recep Tayyip Erdoğan, rather than Pakistan’s traditional mentor, Saudi Arabia. PM Khan upset Riyadh by his attempt to form an alternative Muslim coalition with Turkey and Malaysia to an extent that the Saudis, in an unprecedented move, demanded that Pakistan cancelled its arrangement for deferred payments for oil purchases and asked Pakistan last year to repay the loan. Local media reports in Pakistan indicate that there is a possibility that the UAE too could seek the early repayment of a $3 billion financial support package announced in December 2018.