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IMF’s help is not a long-term solution for Pakistan’s fragile economy: Experts

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Pakistan has finally secured the approval of $3 billion from the International Monetary Fund (IMF), unlocking the long-awaited lending that could help stabilize the delicate economy of the country, thought in a temporary period. The approval could help ease the nation’s dire need for cash and somehow give a new start for the country to help rescue its economy.

The Executive Board of the (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of $3 billion, or “111 percent of quota” to support the authorities’ economic stabilization program, IMF said in a statement.

Indeed, the approval comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in the fiscal year.

IMF expects the new approval to lead to Pakistan’s economic reform aims to support immediate efforts to stabilize the economy and guard against shocks while creating the space for social and development spending to help the people of Pakistan.

“Steadfast policy implementation will be critical for Pakistan and the success of the program, which requires greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms related to the energy sector, climate resilience, and the business climate,” the statement added.

Nearly 230 million nations facing acute balance of payment crisis

But experts say that this approval is not a long-time solution for the country where its 230 million nations are facing an acute balance of payments crisis.

The bailout had been frozen since December and the IMF refused to release $1.1 billion of the loan and blamed Pakistani authorities for not complying with the 2019 agreement signed between the IMF and the then Prime Minister Imran Khan.

The hold on the funds was a big headache for the incumbent government and had created fears that the country would default, giving no hope for the country’s economy.

After months of discussion and struggle, finally the ballot has been approved, a Pakistani expert said, but is skeptical the money could solve the longer solution of an economy-starved nation.

In long-term the agreement would fuel further economic crises

“For the time being it may be a relief but in the long-term it would fuel further economic crises in Pakistan,” Shamim Shahid, a Pakistan political expert told Harici.

Inflation in Pakistan touches all time high.

He furthered that “Pakistan’s Non Development and Defense” expenditures are badly affecting its budgetary allocations, developmental and economic sectors.

“Pakistan, if it really wants to end its economic and financial crises, must slash its non development and defense expenditures. With slashing defense expenditures almost all economic crises could be combated and IMF debts may be reimbursed,” Shahid added.

Analysts say that Pakistan needs at least $20 billion in the next two years to pay its foreign loans. The money is included with interest. Meanwhile, the currency value of Pakistan against dollars has dropped significantly.

The currency and inflation is almost out of control, and now all eyes are on the new agreement to at least stabilize the currency and inflation.

Remaining $1.8 billion will be released in two installments

An Islamabad-based writer and expert, Naveed Aman Khan told Harici that at the stage when Pakistan was at the verge of economic collapse the IMF had released $1.2 billion and it is a good sign.

“Remaining $1.8 billion will be released in two installments. By this year Pakistan will have to bear $ 136 billion burden on its shoulders. Last year external loans were $123.57 billion which may reach $152.136 billion by 2027-28,” Khan added.

Khan furthered that foreign reserves are still far beneath country’s level. “China, Saudi Arabia and UAE have extended their cooperation to avoid economic collapse,” he added, calling it a great achievement for the government.

The positive thing is that Pakistan has gone through a number of reforms to meet the demand of the IMF since its mission arrived in the country in February. These changes include revising its 2023-24 budgets. The IMF also demanded the central bank of Pakistan to remain proactive to reduce inflation.

At the same time, reforms in the energy sector which has accumulated $12.58 billion in debt have been a key agenda of the talks between IMF and the Pakistani authorities.

Pakistan’s PM reaction to the agreement

Prime Minister Shehbaz Sharif has welcomed the IMF agreement and said it will help the country improve its economy.

“The approval of the Stand-by Agreement of $3 billion by the IMF’s Executive Board is a major step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability,” Shehbaz added.

Pakistan primer furthered: “It (agreement) bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving the next government the fiscal space to chart the way forward. This milestone, which was achieved against the heaviest of odds and against a seemingly impossible deadline, could not have been possible without excellent team effort,” he added.

Analysts say that the approval of the IMF bailout will also encourage other countries and international financial institutions to help start funding Islamabad to overcome economic challenges.

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Chinese, Russian troops hold joint exercise targeting cross-border terrorism

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China and Russia have held a joint military exercise focusing on cross-border terrorism, amid growing concern over terrorist attacks in Moscow.

The drill was held on 25 June in a river area near the Heilongjiang Bridge linking Russia’s Blagoveshchensk and China’s Heihe, the Chinese military’s official media outlet PLA Daily reported on Tuesday.

It was the first joint counter-terrorism drill between the neighbouring countries since Russia’s intervention in Ukraine.

It came just days after terrorist attacks in Russia’s southern region of Dagestan on 23 June, in which at least 22 people were killed in shootings at two synagogues, two Orthodox churches and a police station.

In March, more than 140 people were killed in an attack on a concert hall in Moscow, the deadliest terrorist attack in Russia for almost two decades. The Khorosan branch of ISIS claimed responsibility for the attack.

According to the PLA Daily, last week’s joint exercise simulated ‘terrorists trying to cross the border’ to launch an attack.

Chinese and Russian troops used aerial reconnaissance, maritime interception and land ambush to intercept and capture the terrorists during the exercise.

The exercise, which focused on improving intelligence sharing and operational coordination, showed the “firm determination” of both militaries to take effective measures to “combat all forms of terrorism, separatism and extremism” while jointly securing border areas, the report said.

The report also said that the two sides discussed further deepening border cooperation.

This is not the first time the two countries have held joint counter-terrorism exercises. In 2019, China’s People’s Armed Police took part in an exercise with the Russian National Guard in Russia.

According to Tass, Russian Foreign Minister Sergei Lavrov reaffirmed the two countries’ ongoing cooperation in the fight against terrorism, including on multilateral platforms, during a meeting with his Chinese counterpart Wang Yi in April.

Aiming to strengthen law enforcement cooperation

Last week’s joint exercise follows an agreement between Chinese and Russian leaders during Russian President Vladimir Putin’s visit to Beijing in May to strengthen cooperation in law enforcement and defence, including by expanding joint training and exercises.

The Chinese and Russian coast guards also signed a memorandum of understanding on maritime law enforcement cooperation in April last year.

In March, China and Russia organised a naval exercise with Iran focusing on anti-piracy efforts. China and Russia also held joint naval and air exercises in the Sea of Japan, or East Sea, in July last year.

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Controversial military operations and ethnic dynamics in Pakistan’s fight against terrorism

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In a recent high-level meeting, the federal government of Pakistan announced its intention to launch a new military operation against terrorist organizations. This decision is aimed at eradicating militancy under the banner of Azm-i-Istehkam. Surprisingly, the military leadership has remained silent on this proposed operation, leaving the advocacy to political figures, notably Defense Minister Khawaja Asif of the Pakistan Muslim League (PML-N).

The Pakistan People’s Party (PPP), a significant coalition partner in the federal government, has maintained a conspicuous silence on the matter. Meanwhile, despite the approval from Khyber Pakhtunkhwa’s Chief Minister Ali Amin Gandapur, factions within Pakistan Tehreek-e-Insaf (PTI) and the Sunni Ittehad Council have openly opposed the operation. This divergence in political opinion highlights the complex dynamics at play in Pakistan’s approach to counter-terrorism.

The opposition from various regional and ethnic parties, including the Pashtun Protection Movement (PTM), Pakhtunkhwa Milli Awami Party (PkMAP), and the Awami National Party (ANP), stems from deep-seated concerns about the operation’s focus and its implications. Historically, PTI and PkMAP have not been staunchly anti-Taliban. PTI’s leader, Imran Khan, has consistently opposed military actions against Taliban militants, advocating instead for dialogue. Similarly, PkMAP leader Mehmood Khan Achakzai, while ostensibly opposing terrorism, is perceived to have friendly relations with the Taliban, as evidenced by the relative safety of his party members from Taliban attacks.

Significant religious-political entities have complex stances on militancy in Pakistan

The relative safety of certain political groups, like PTM and the National Democratic Movement, from Taliban violence raises questions. Critics argue that this perceived immunity could suggest covert alliances or understandings, casting doubt on the motivations behind their opposition to the military operation.

Jamiat Ulama-e-Islam (JUI-F) and Jamaat-e-Islami (JI), both significant religious-political entities, have complex stances on militancy. JUI-F’s position has been ambiguous since the Soviet invasion of Afghanistan in 1979. In contrast, JI, having reaped substantial benefits from the Afghan war, now finds itself sidelined and is striving to reassert its relevance by attempting to align with nationalist sentiments.

The media and sections of the government, particularly those influenced by Punjabi and Urdu-speaking elites, have often portrayed the Taliban as predominantly Pashtun. This narrative has led to the proposed military operation being focused on Pashtun-majority areas, such as Khyber Pakhtunkhwa and Balochistan. Defense Minister Khawaja Asif’s statement that the operation will target these regions reinforces this perception.

Pashtun-dominated regions reject the notion that terrorism is a Pashtun phenomenon

However, leaders from Pashtun-dominated regions, like Khan Muhammad Wazir of the ANP, reject the notion that terrorism is a Pashtun phenomenon. Wazir points to the involvement of non-Pashtun militants in numerous terror attacks across Pakistan. He highlights the role of Punjabi militants in groups like the Punjabi Taliban, Lashkar-e-Jhangvi, and Jamaat-ul-Ahrar, who have orchestrated some of the deadliest attacks in recent years. Wazir’s argument underscores the ethnic diversity of militant groups in Pakistan, challenging the stereotype of the Pashtun terrorist.

Wazir’s emotional plea for an operation starting in Punjab, rather than Pashtun areas, aims to shift the focus to the diverse origins of militancy. He names several key figures from Punjab involved in terrorist activities, such as Tariq Lahori of Daesh and Maulana Qasmi of Jamaat-ul-Ahrar. By highlighting these figures, Wazir seeks to demonstrate that terrorism in Pakistan is not confined to any single ethnic group.

Doubt on the narration of the proposed military operation “Azm-i-Istekham”

The insistence on a military operation in Pashtun regions, driven by a media narrative dominated by Punjabi and Urdu-speaking elites, risks alienating the Pashtun community. Wazir’s call for international intervention by entities like China, the United States, Russia, the United Nations, and the Organization of Islamic Cooperation (OIC) underscores the severity of this perceived ethnic targeting. If the government and media continue to frame terrorism as a predominantly Pashtun issue, it may lead to increased ethnic tensions and further marginalize the Pashtun population.

The proposed military operation “Azm-i-Istehkam” and the political dynamics surrounding it reveal deep-seated ethnic and regional tensions within Pakistan. While the operation aims to eradicate terrorism, its focus on Pashtun areas risks reinforcing harmful stereotypes and overlooking the broader ethnic diversity of militant groups. A more equitable approach, recognizing the involvement of non-Pashtun militants and addressing the root causes of militancy across all regions, is crucial for fostering national unity and effectively combating terrorism. Only through such an inclusive strategy can Pakistan hope to achieve lasting peace and stability.

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Huawei Harmony aims to end China’s reliance on Windows and Android

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While Chinese tech giant Huawei’s recent smartphone launches have been closely watched for signs of progress in China’s chip supply chain, the company has also developed expertise in sectors vital to Beijing’s vision of technological self-sufficiency, from operating systems to car software.

Chinese President Xi Jinping told the CPC Politburo last year that China must fight hard to localise operating systems and other technologies “as soon as possible” as the US restricts exports of advanced chips and other components.

OpenHarmony, developed by Huawei, is widely promoted in China as the “national operating system”.

“This strategic move is likely to erode the market share of Western operating systems such as Android and Windows in China as local products gain traction,” Sunny Cheung, an associate fellow at the Jamestown Foundation, a US defence policy group, told Reuters.

In the first quarter of 2024, Huawei’s own version of the HarmonyOS operating system overtook Apple’s iOS to become the second best-selling mobile operating system in China after Android, according to research firm Counterpoint. It has not yet been released on smartphones outside China.

“Harmony has created a strong core operating system for the future of China’s devices,” Richard Yu, president of Huawei’s consumer business group, said at the opening of a developer conference last week.

Self-sufficiency

Huawei first introduced Harmony in August 2019, three months after Washington imposed trade restrictions over alleged security concerns. Huawei denies that its equipment poses a risk.

Since then, China has stepped up its self-sufficiency efforts, pulling out of the main code-sharing centre Github and supporting a local version, Gitee.

China banned the use of Windows on government computers in 2014 and now uses mostly Linux-based operating systems.

Microsoft derives only 1.5 per cent of its revenue from China, its chief executive said this month.

Originally built on an open-source Android system, Huawei this year released the first “pure” version of HarmonyOS, which no longer supports Android-based apps, further separating China’s app ecosystem from the rest of the world.

Huawei said in its 2023 annual report that OpenHarmony was the fastest-growing open source operating system for smart devices last year, with more than 70 organisations contributing to it and more than 460 hardware and software products produced in the financial, education, aerospace and industrial sectors.

Visited by Reuters, Charlie Cheng, deputy director of the Harmony Ecosystem Innovation Centre, said the aim of making it open-source was to replicate Android’s success in eliminating licensing costs for users and provide companies with a customisable springboard for their own products.

“Harmony will definitely become a mainstream operating system and give the world a new choice of operating systems besides iOS and Android,” he said.

Google, Apple and Microsoft did not respond to requests for comment.

China’s previous efforts to build large open source projects have struggled to gain traction among developers, but Huawei’s growing smartphone market share and extra work to develop a broader ecosystem gives Harmony an edge, analysts said.

Huawei’s Yu said this month that more than 900 million devices, including smartphones, watches and car systems, were running HarmonyOS and that 2.4 million developers were coding in the ecosystem.

“OpenHarmony will need more time and iterations for these developers to feel more confident about working with OpenHarmony,” Emma Xu, an analyst at research firm Canalys, told Reuters, adding: “But the reputation, behaviour and trust that HarmonyOS has achieved will certainly have a positive impact.”

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