It's the money, honey: Pak Army chief Asim Munir's Hindu-Muslim, two-nation rant motive could be more overseas Pakistani funds amid debt

Asim Munir's Hindu-Muslim two-nation theory speech and Pakistan economy: General Asim Munir, the Pakistani Army chief, reinvoked the two-nation theory to argue that India and Pakistan were two very different nations, as his people were different from Hindus in every aspect of life. His public remarks at the Overseas Pakistanis Convention in Islamabad on Wednesday (Apr 16) raised more than a few eyebrows. But what was he trying to do? More than what he said, what was the motive? Probably the idea is to rouse a pro-Pakistan sentiment, which he hopes to translate into more remittances and investments from the diaspora. What he didn't say is the reason for what he said: Pakistan's poverty.

But first, let's look at Asim Munir, full name Syed Asim Munir Ahmed Shah, said.

The crux of his speech was that the story of Pakistan should never be forgotten. It is in this context that he recollected the two-nation theory, which led to the formation of Pakistan, because Hindus and Muslims were different.

"My dear brothers and sisters and sons and daughters, please don’t forget the story of Pakistan, and don’t forget to narrate this story of Pakistan to your next generation, so that their bond with Pakistan never weakens, whether it is the third generation, or the fourth generation, or the fifth generation, they know what Pakistan is for them," said the Pakistan army chief.

"You have to narrate Pakistan’s story to your children so that they don’t forget it when our forefathers thought we were different from Hindus in every possible aspect of life," he added.

He stressed the cultural, religious, and ideological differences between Hindus and Muslims, which led to Pakistan's creation. 

"Our religion is different, our customs are different, our traditions are different, our thoughts are different, our ambitions are different, that's where the foundation of the two-nation theory was laid," said Munir.

"We [India and Pakistan] are two nations, we are not one nation," he emphasised, almost as if he was trying to justify the creation of Pakistan after the Partition of the Indian subcontinent, more than seven decades after it happened.

He also spoke about terrorism, particularly in Balochistan. Gen Munir vowed to eliminate Balochistan Liberation Army, Balochistan Liberation Front and Baloch Republican Army, saying: "We will beat the hell out of these terrorists very soon. You think these 1,500 terrorists, belonging to BLA, BLF and BRA, etc, can take away Balochistan from us?"

Even ten generations of terrorists cannot harm Balochistan and Pakistan, he added for good measure.

The overseas Pakistanis are being wooed by the Pakistani establishment for only one reason: their remittances and investments.

It's a hidden national shame for Pakistan that it had to go with a begging bowl to countries like Saudi Arabia and institutions like the International Monetary Fund, World Bank and Asian Development Bank to overcome years of economic instability.

It is in this context, perhaps, that General Asim Munir tried to appeal to the nationalist sentiments of the overseas Pakistanis.

The Pakistani economy has struggled in the past decades due to a deadly cocktail of factors: rapid population growth, political instability, poor economic policies and fiscal mismanagement.
  
Pakistan's population has quadrupled in 50 years while its economy fell behind neighours in South Asia like India, Sri Lanka and Bangladesh.

Here is some perspective: Pakistan had a higher income per capita than its neighbours in the early 1970s, but by 2023, its income per capita was half of theirs.

Investment has come down when compared to the rest of South Asia, affecting economic growth. 

In fact, this is an area where Overseas Pakistanis could help.

  
The country’s savings rate has been far below other South Asian nations, made worse by a large, young population.
Pakistan has fewer people in the workforce relative to its total population, limiting savings and investment.

The Pakistani government is struggling to manage fiscal deficits, leading to a sharp increase in public debt.
 

By 2021–2022, Pakistan’s budget deficit was 8 per cent of GDP, and its external current account deficit reached 5 per cent.
  
Pakistan has relied on borrowing to finance needs, causing foreign exchange shortages, currency devaluation, and inflation.

Between 2021 and 2023, Pakistan faced severe financial instability. Its foreign exchange reserves fell drastically, and inflation surged up to 38 per cent and beyond.
    
In this period, the Pakistani rupee lost more than half its value against the dollar.

After months of negotiations for loans from the IMF, Pakistan agreed to do urgently needed economic reforms, including on taxes and external debt restructuring.

But tax reform, with the aim of increasing tax revenue, is easier said than done.

Tax collection is weak, especially from the agriculture and real estate sectors. 

And any further taxation would lead to public protests.

Pakistan continues to face high interest payments on its national debt and low investment.

A default on its sovereign debt could cause further problems, like a collapse or destabilisation of its banking system.

Restructuring of external debt - Pakistan's debtors include Saudi Arabia and China - could affect bilateral relations and hurt its chances of getting further international financing.

By 2018-2019, Pakistan's public debt was 80 per cent of GDP and seven times the government’s annual revenue. Interest payments on these debts consumed 40 per cent of the government’s revenue by this period.

In 2021-2022, the budget deficit reached  8 per cent of GDP. External current account deficit in the same period was near 5 per cent of GDP.
   
Inflation jumped to 38 per cent in 2023.

More than 60 per cent of government revenue is spent on servicing debt interest.

Out of its external debt, 85 per cent is owed to bilateral and multilateral creditors like the IMF.

Foreign exchange reserves fell to two weeks’ worth of imports by June 2023.
At $4 billion, they covered only 10 per cent of the $30 billion in financing needed for the upcoming year.

By mid-2024, public debt was 75 of GDP, out of which 40 per cent was in foreign currencies.

Pakistan is participating in an IMF Extended Fund Facility (EFF) programme to help address its balance of payment crisis.

The programme aims at reforms that will reduce the budget deficit by 3 per cent of GDP over three years, largely through increased tax revenue.

Public spending needs to be curbed to remain just above 13 per cent of GDP.

Domestic debt restructuring could be a problem, as nearly 60 per cent of it is held by banks. Restructuring that debt could lead to collapse of the banking sector in worst case scenario.

Defaulting on foreign debt, on the other hand, could disrupt Pakistan's trade and harm relations with creditors like the World Bank and Asian Development Bank.

Investment is expected to average at around 15 per cent of GDP in the next five years, below the 16 per cent average since 1990.

With his speech, the army chief was probably trying to appeal to hardcore nationalists and radical elements in Pakistan.

In the process, he essentially touched upon many political themes, which are not befitting of an army general.

His comments could affect Hindus in Pakistan, alienating an already suffering minority.

He raised the Kashmir issue again, trying to rouse nationalist sentiments in the minds of a bunch of overseas Pakistanis.

His mention of terrorism emanating from Balochistan is interesting, as it's also a result of poverty. The people of Balochistan, as well as in Pakistan-occupied Kashmir, have been facing poverty and discrimination, and there have been several protests. The Baloch separatist movement can at least partially be attributed to this poverty.

So overall, Munir's speech was an attempt to re-sell the Pakistan story to the diaspora.

How much he can pull their money back into Pakistan remains to be seen.

But then, Pakistan is always ruled by proxy by the Army, whether it's in charge as dictators, or behind the scenes of elected governments.

Perhaps that's why Munir hopes the overseas Pakistanis would take him seriously.