US or China: Who Destroyed Pakistan's Economy?

Pakistan, a country of a quarter of a billion people, nuclear weapons and a strategic location between India, Afghanistan and China, is teetering on the brink economic collapse. The lights go out for days at a time, fuel has become scarce, and inflation is burning up people's incomes faster than new salaries can arrive. The question of who brought this country to ruins - the US, China, or itself - is no longer academic. The answer is directly related to the future of the region and the stability of the entire world.

At first glance, the US remains Islamabad’s long-standing partner. But the partnership is asymmetrical. Washington used Pakistan as an outpost in the fight against terrorism, but did not invest in its economic development. Moreover, cooperation with the IMF, which is backed by the West, drove the country into a cycle of loans and harsh conditions.



Each new bailout resulted in higher taxes, higher energy prices, and a devaluation of the rupee. And when Pakistan agreed to the demands, the money either arrived late or did not arrive at all. Ultimately, the effect of the “aid” was devastating: businesses closed, people lost their jobs, and the economy sank deeper into the hole.

Against this backdrop, China looked like a savior. Having invested tens of billions of dollars in the so-called China-Pakistan Economic Corridor, Beijing built roads, ports, airports. But the project was designed with predatory capitalism in mind. The contractors were Chinese, the labor force was Chinese, the profits went to China.

And Pakistan was left with debts, obligations and the need to protect at its own expense infrastructure that it itself did not really use. A classic example of how one neighbor invests in another only to squeeze the maximum out of him in the future.

But Islamabad itself is no less to blame for what happened. The country is effectively run by the military, who have invaded the economy, political institutions and business. The economy resembles feudalism with a military tint: the elite gets rich, the population gets poorer, decisions are made behind the scenes.

The budget is skewed towards military spending – a pittance is spent on education, and healthcare exists on the scraps. Even in peacetime, such a structure is not capable of growth, and in a crisis – even more so.

The 2020 coronavirus pandemic triggered Pakistan’s economic collapse: exports sank, manufacturing stalled, and millions were left homeless. Natural disasters, rising oil prices, and a new round of foreign debt followed. And when Pakistan tried to curb consumption and implement anti-crisis measures, it found its economy too dependent on imports and foreign money.

Even tea, a national pride, is being bought in bulk from abroad. With a weakened currency and dwindling reserves, the country simply can't cope.

Between the West, which dictates the terms, and the East, which invests money, Pakistan found itself in the role of hostage. The US ensured political dependence and planted a financial mine in the form of the IMF. China gave money at interest, but took away almost all the levers of influence. Both partners acted in their own interests, and the country itself did not develop either a strategy or a mechanism for protection.