In a country overburdened with the historical accumulation of debt, along with a pandemic struck economy, a potential rupture in the government’s capacity to carry out the day-to-day functions of the state doesn’t portend well for the future. There is almost a consensus that the major economic challenges facing Pakistan are rising poverty and unemployment, heavy external and domestic indebtedness, high fiscal deficit and low investment. Although rising petroleum prices, dwindling incomes, and spiraling food costs are the main issues the new government to tackle first. Imran Khan, the Pakistan cricket star who became prime minister, ascended to power in 2018 with great fanfare and promises of making his country a land of opportunity. But nearly four years on, Khan has been voted out of office and his charisma has faded. Though some supporters still believe Khan will make a comeback and laud the successes of his tenure, the legacy of his premiership tells a different story a shattered economy and a polarized society. When Khan came to power in 2018, he was riding on a wave that promised “change” but his inflexible attitude towards the opposition created a deadlock that topped the list of his failures of governance. Khan is still popular among Pakistan’s youth, and if he manages to sell supporters on his “anti-American sentiment”, he could bounce back with even more popularity and power.
In his first public statement after losing the crucial no confidence vote that saw him removed from office in the early hours of Sunday morning, Khan spoke again about a “foreign conspiracy of regime change”. Regime change amidst political and economic instability in countries. The government headed by Pakistan’s Prime Minister Imran Khan has resigned following the loss of a trust vote in Parliament. This is a victory for the Pakistan Democratic Movement, comprising 11 ideologically diverse opposition parties that got together in September 2020, which has nominated Shehbaz Sharif of the Pakistan Muslim League-Nawaz (PML-N) to succeed Khan as their joint candidate for PM. Pakistan’s parliament has elected Shehbaz Sharif as the country’s new and 23rd prime minister. The election came after Imran Khan was removed from PM office after losing a no-confidence vote. Ahead of Monday’s vote, lawmakers from Khan’s Pakistan Tehreek-e-Insaf (PTI) party resigned en-masse, boycotting the election of Sharif. Despite the new political leadership, the country will continue to be buffeted by winds of political instability. This is not only because the outgoing PM and his party, Pakistan Tehreek-e-Insaf, is launching a so-called freedom struggle against the incoming administration. More importantly, this is because the all-powerful army wields the real power in the system and its favored and chosen heads of government end up reading from a different script time after time, as happened in the case of Khan and may happen to the new PM Sharif as well.
No doubt, the top priority of the Sharif-led regime will be to address the festering economic problems of the country. Although Pakistan’s economy is on the mend and likely to register growth of 4% in 2021-22 (July to June) while foreign reserves dropped to $11.3 billion as at April 1, compared to $16.2 billion less than a month earlier. After contracting for the first time since the 1950s couple of years ago focused attention is necessary to tackle the raging double-digit food inflation, rising joblessness among the youth and stressed balance of payments situation that led it to the doors of the International Monetary Fund for a bailout. Last December, the former chairman of the Federal Board of Revenue made an astounding statement that Pakistan was bankrupt and was not in a state of a going concern. The foreign debt was $115
billion and the current account deficit was $5-8 billion. Paying that huge debt is a major challenge for the incoming administration. The central bank last week hiked key interest rates by 250 basis points to 12.25% in an emergency decision, the biggest hike in decades, citing deterioration in the outlook for inflation and an increase in risks to external stability, heightened by the Russia-Ukraine conflict, as well as local political uncertainty. The bank also revised average inflation forecasts upwards to slightly above 11% in FY22, which ends in June.
Sharif said his government would focus on reconciliation in a society polarized by former leader Imran Khan’s policies and reviving a troubled economy. “The economic challenges are huge and we need to make a way out of these troubles. We will have to shed sweat and blood to revive the economy. The newly elected prime minister said the country was on the way to posting the largest budget deficit in its history as well as historical trade and current account deficits. In his first speech as PM, Sharif said that his new government was faced with the huge challenge of bringing the economy back on track following Khan’s mismanagement. The situation is very bad, but I am sure that we will change it with the blessing of Allah and with hard work. The Pakistan Stock Exchange (PSX) benchmark KSE-100 index has soared more than 1,500 points, with analysts attributing the rally to a potential end to weeks of political instability. The index opened at 44,444.58 and was up by 1541.57 points, or 3.47 percent, by 12:30pm (07:30 GMT). The market has responded positively to political stability.
A new government’s ascent to the helm can also affect pre-existing agreements and projects, and adversely impact the aid programme with IMF, which even though marred with domestic contestation is a necessity for Pakistan. Even if the Imran Khan government can effectively sail through this turbulence, its capacity to govern will be affected by the calls for protest by the opposition. These warnings, even though based on superficial pomposity, do have the potential of further pushing the country on a path of total uncertainty. The prime minister spoke of improving relations with all countries on equality basis especially with India, but said a durable peace “can’t be possible without Kashmir’s solution”. India and Pakistan have fought three wars over the disputed Himalayan region. Sharif said his government will speed up Beijing-backed projects in Pakistan. The projects are being carried out under the $60bn China-Pakistan Economic Corridor (CPEC) – a part of Beijing’s Belt and Road Initiative.
