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[global-politics]

Is Unipolar World Order Coming to an End?

China as the Rising Super Power Is Unipolar World Order Coming to an End: We are seeing China get ever closer to joining the US as a world super power. We had a long unipolar moment that began after the ed of the Cold War and has lasted till now. China’s economic performance demonstrates that it is really close to becoming a super power. Its military modernization is relentless and we not be far off from the moment when the unipolar power comes to an end. China’s tremendous amount of capital that it can deploy in so many ways is something the US can not do. Similarly, the Chines BRI is such a milestone for the world order and international relations. This is something which China could do. More research articles

The current situation of Multipolarity

On one hand we have a level of multipolarity at play in which you have a number of the other powers that are able to assert themselves often aggressively, as we saw Russia. That’s simply something that the US has not been able to stop. I would argue that the rise of China has led to a situation where Beijing has been able to develop partnerships with a number of countries who for many years had good relations with the US.

Moreover, China, although its vehicle of infrastructure and investments has been able to push back at that helps for sure. You can see in that regard that the US’s efforts to build a good consensus and coalition to push back China has only had limited success. You have so many countries around the world including in the West and EU that value their trade relations with China. They would not imperil their relationship with China for the US efforts to counter the Chinese led Power.

In addition to this, I would also argue that there’s somewhat similar dynamics with Russia. The US has been trying to make this global effort to impose sanctions on Russia and isolate it. But it had a limited effect because many countries including EU are heavily dependent on Russia for energy. I think until those countries which are so reliant on Russia are able to find an alternate, the US is going to have limited efforts of leading from the front and getting the world to unite against countering Russia. That’s a reflection of the fact that you have other major powers that have been able to develop these important commercial relationships.

Pakistan relationship with the US

Pakistan’s relationship with the US has been very volatile. I would argue that a key development occurred last August when the US left Afghanistan. The perception in Pakistan is correct that the US officials viewed Pakistan from the lens of Afghanistan. Ever since the US left and relocated their embassy, there has been a drift in relationship. It’s been on hold. It’s been unsettled. It has been in search of a new anchor for a relationship that it has been unable to find. You could argue that this is an area of cooperation.

Moreover, there has been a bit of bad blood with the developments of the last 2 3 months with the Imran Khan’s allegations of a US conspiracy. The new government will allow some of that rhetoric to dissipate al least on official level and allow for a space for the future cooperation. The relationship has suffered some blows. The new PM of Pakistan has offered conciliatory messages and so has the US government responded. I do believe that Washington will have a high comfort level working with Shehbaz Sharif than with Imran Khan because of the allegations Imran Khan made.

Furthermore, just a quick side note, the Pak-US relationship was not always bad under Imran Khan’s rule. He made a very successful visit to the President Trump in the White House a few summers ago. Donald Trump had asked Imran Khan to negotiate and bring the Taliban to negotiations wit the US. It was only in recent months when President Joe Biden infamously did not call Imran Khan and things got worse. I do agree that in past, the US, Pakistan relations has been what some would call as Imperial. There frequently has been meddling in Pakistan’s domestic politics. If you look at the US had done in terms of the drone strike campaigns, the efforts to track down Bin Laden with a fake vaccination campaign. I understand why Pakistan are certainly skeptical and suspicious of the US policies. In Washington, there is certainly acknowledgment of that. But I do think that the relationship can come around and overcome the problems of the last 3 months. But my sense is that Imran Khan will continue to hold on to that narrative of a US led effort to oust him.

US Influence in South Asia

When the US plays a democracy card, it is more critical of the countries that are not allies or strategic partners pf the US. But New Delhi has been a bit concerned about what the Biden Administration had said about India. Including the 2+2 dialogue that happened in the Washington 2 months ago in which the Foreign Affairs and defense officials of both the countries met to talk about security and diplomacy. Antony Blinken, the US Secretory of State, made this concern about human rights record (of India). But I think this is a separate question from the larger question of how the US sees South Asia and how it sees what China is up to and what Russia is up to.

In addition to this, it’s very interesting, I think that South Asia has become a major battle field for India-China competition and also for the China-US competition. China is Washington top foreign policy concern. When the US has tended to accord to Asia, it has looked at East Asia. That’s because the US top treaty allies are there like Japan and South Korea. It’s also East Asia where China has been doing stuff that concerns the US. Mostly its provocation in the South China Sea that directly impacts key US partners and allies. Now that we see China deepening its relationship, not only with Pakistan but also its commercial presence in the region including in the countries where traditionally, India had been a key external player. I think that we have seen in recent times and what we will see more in future is the US trying to bring most of the countries in South Asia under its Indo-Pacific strategy.

Final point on this is the Russia factor. South Asia is a region where Russia has no enemies. Half of the SAARC countries abstained from the first General Assembly resolution condemning the Russia invasion. Russia has been able to develop a soft power in many countries of South Asia. Not only in India but also in Bangladesh and Sri Lanka and many other countries which is serious threat to the US made unipolar World Order in the South Asia.

[global-politics]

Is Pakistan on the Verge of Bankruptcy?

Introduction

Pakistan’s economy has been trembling since quite a while but in the last one year alone the rupee depreciated by almost 30%. Pakistan’s internal political instability added to the existing covid super cycle straining the economy even more.

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Pakistan Economy: Current Scenario

In present, the issue of weak economy has pushed the country to the brink of an effusion. In the next 2-3 months, our situation will not lead us to bankruptcy. Because our payments and current account is still some potential. But as time pass, reserves will reduce and if we don’t have money, there will be a lot of problems in the future.

Understanding the economics of currency 

Historically, Pakistan has a fixed exchange rate which had a few alterations. In the last three years, there has been a free float to which State Bank has responded that it will only control the volatility but not the direction. This concern is that because of currency depreciation, there is inflation and decrease in purchasing power but if it doesn’t happen, it against the economic fundamentals. 

Moreover, we print rupee but not dollars. The printing rate can be fixed according to the foreign exchange reserves. Then there is a real effective exchange rate. It takes into account the country’s inflation, trading partners inflation and the nominal exchange rate of both.  

The third thing is the current account deficit which means the difference between impots and exports. In Pakistan, the reserve situation has always been low, inflation has been high and rupee quantum high. The current account deficit also generally remains high, that’s why the currency is always under pressure. Then there is this belief that if currency is depreciated, it impacts the exports. This impact is not immediate although.  

Furthermore, Currency depreciation has its own disadvantages. For example, foreign investors stop their investments. There is a need for competitive practices in Pakistan. When there is stability in a country, the currency strengthens.  

The solution to Currency Devaluation 

The import ban is not a great idea. This is a short-term measure and includes some things like chocolate and tissue paper etc which are smuggled anyway. When imports are banned, the demand for local products increase. For example, local tissue papers demand has increased but the raw material to manufacture it is also imported. That’s why domestic tissue paper is the more expensive than imported. The ban has both pros and cons.

Secondly, the import ban has a lot of restrictions from the WTO so it should be considered very carefully. A better practice in this solution of current account deficit would be to implement a forced slowdown of the economy. More than non-essential imports Pakistan does essential imports, mainly the energy items. This includes petrol which is used in cars and manufacturing items used in the industries here. The better solution is to slowdown the economy which means to reduce demand.

Commercial hours should be reduced to 6 pm.

Overall, the number of cars on the roads should be reduced.

Commercial activity should be reduced.

Load shedding at this point would reduce energy consumption.

Overall, slowed economy will have a higher impact on some sectors. 

The impact of Politics on Economy 

Until February, there was still some direction under the government which was following that plan for the last 16-to-18 months. The government was supported to make the budget and carry the IMF program. Since the vote of no confidence came, instability began. The former PM froze the petroleum prices for four months which was a mix of tax and some subsidy on petrol and diesel which was nullified.

In addition to this, Subsidies on some products increased but the government didn’t allow it. After the new government came and ever since Imran Khan decided to go out on the streets. This put pressure on the current government.  

How can the IMF help? 

When we went to IMF and the pending issue was that of pending subsidies, but we presented the budget and all the subsidies has removed. Because the energy subsidy has been going on for 3 months which has created fiscal losses. This difference between tax and subsidy is about 300-400 billion. To fulfil the gap new taxes introduced in the budget and subsidies have removed. That was the plan with the IMF. 

As a result, indirect taxes increased, the inflation increased. The price of petrol and diesel increased. If the rich are taxed more, it will be better.  

There is this talk that the IMF loan is to be introduced from 6 billion to 8 billion but in the large context, it’s a very small amount so the government thinks why take such a difficult decision?  

Similarly, it not just about the IMF. When there is a balance of payment crisis, other trading countries also become very conscious about their investments. They think that their good money which was invested before will turn bad, if they pour in more money. China, UAE and Saudi Arabia had to give us loans, but they stopped. As long as IMF money doesn’t come, it will be difficult to get loan from somewhere else. We can’t go to the international market so we have to reached a standstill situation. No one wants to invest because our crisis is so bad. If we go to the IMF and follow their targets, the IMF will give us an approval stamp which will be the basis for other countries to give loans. The IMF is really important in this situation.

The writer is CSS Aspirant and Master in Political Science.