Pakistan’s current political troubles are pushing the country to the edge of economic precipice

Never before did the country have to confront so many serious challenges in such a divided and fractured state.


November 8, 2022

ISLAMABAD – THE assassination attempt on PTI leader Imran Khan has plunged the country into chaos at a time when tensions between the opposition and government were already spiralling out of control. Such violence is condemnable and unacceptable. It should have no place in the country whose tortuous history has seen assassinations of political leaders in the past.

The tragic assassination of Benazir Bhutto is still painfully fresh in the nation’s collective memory. But the attack on Khan last week also confirmed the worst fears of those who had been sounding an alarm about the increasingly explosive political situation descending into violence. Khan had frequently spoken about a threat to his life but carried on with his long march to press the demand for immediate elections.

After last week’s shooting tempers of angry PTI supporters have been rising to a fever pitch. Protests broke out in many cities. In his first press conference since being shot, Imran Khan called for the resignation of the prime minister, federal interior minister and a senior intelligence official, accusing them of plotting to murder him.

He offered no evidence but called for public protests until this demand was accepted. He also said the long march would resume once he recovered. Khan’s allegations prompted a strong response from ISPR, which emphatically rejected his “baseless and irresponsible” accusations against the army.

Meanwhile, speculation continues to run rife about who was behind the attack on Khan’s convoy and who would benefit from it. Few believe the attack was carried out by a lone assailant. PTI leaders insist there was more than one gunman.

Compounding the mystery was the prompt confessional video of the assailant released by Wazirabad’s local police. In a polarised environment, partisanship has been dictating the response to the murderous attempt with conspiracy theories running rampant. The Punjab government has made matters worse by its inept handling of the incident.

Unless there is political calm it would be difficult to get to the bottom of what happened in an impartial way. Accusations before an investigation has taken place will only hinder and muddy the waters in the search for the truth. Both the government and opposition need to bring down the political temperature so that a credible and transparent investigation can get underway.

Never before did the country have to confront so many serious challenges in such a divided and fractured state.

The initial outpouring of nationwide sympathy for the former prime minister including from his political foes held out the hope, albeit fleetingly, that the atmosphere would become less charged. But it didn’t take long for both sides to engage in fierce verbal clashes that quickly vitiated the atmosphere.

Remarks by the federal interior minister further added fuel to the fire. Both sides accused each other of crossing ‘red lines’ and ‘politicising’ the assassination attempt. The political discourse lurched between those blaming the victim for ignoring security requirements and others holding coalition government leaders responsible.

The tragic incident has left the country even more divided. It has compounded the seven-month-old political crisis, making its resolution even more problematic. With PTI calling for countrywide protests and ‘revenge’ political turbulence is expected to continue. This at a time when even before the attempt on Khan’s life, the country was reeling from multiple, overlapping crises — political, economic, institutional — as well as the challenge of recovering from the worst climate-induced floods the country has seen. Never before has Pakistan needed to navigate these serious challenges in such a divided and fractured state.

Most significantly, intensifying political polarisation will serve as an impediment to the country’s ability to deal with a bigger challenge — a deeply troubled economy. The uncertainty generated by political unrest and turmoil is pushing the country to the edge of the economic precipice.

Far from being out of the woods the economy faces solvency challenges ahead. Despite the revival of the IMF programme, cash injections from friendly countries and other international financial institutions and assistance for floods, the country’s needs are enormous to finance the current account deficit and meet external debt obligations.

Foreign exchange reserves are at a three-year low, enough to cover just six weeks of imports. Two rating agencies, Moody’s and Fitch, have downgraded Pakistan’s credit rating. The economic damage from floods, estimated at over $30 billion, has exacerbated the country’s financial difficulties. So has the economic fallout of the Ukraine war in the shape of soaring oil and food prices and the prospect of major LNG shortages in the coming winter months.

The market has been nervous over the billion-dollar sovereign bond payment due in December. The bond has been trading at a huge discount. The government insists it has lined up adequate finances to pay this and meet the heavy external obligations ahead.

Its confidence may be based on expectations that it would secure debt rollovers and more assistance from bilateral creditors and that volatility in global energy markets will ease. The government claims it will get additional — and substantial — financial help from Saudi Arabia and China this fiscal year. But here lies the problem.

While Pakistan has faced repeated balance-of-payments and liquidity crises in the past, today it has to deal with this in an adverse external environment in which the aftershocks of the Covid pandemic and fallout of the Ukraine conflict have left supply chains and global commodity and financial markets in an unsettled state.

The impact of unpredictability on the country’s perilous external position when its foreign exchange reserve cushion is eroding cannot be underestimated. Uncertainty is putting pressure on the exchange rate with a weak rupee fuelling inflation, which continues to be stubbornly high.

Moreover, prospects of an economic recovery depend critically on the level of private investment, which is the most important indicator of the country’s growth path and sustainable financial stability. But investors remain hesitant due to heightened political uncertainty. Anticipation of more political unrest is dampening investor sentiment and reinforcing their instinct to sit it out. It is also making markets edgy.

If current political troubles continue with no end in sight, it will exact an even heavier toll on a struggling economy, increase people’s economic hardship and leave the country in a more ungovernable state — regardless of cash help from friendly nations. Living on loans from outside will not fix Pakistan’s internal problems.

The writer is a former ambassador to the US, UK & UN.

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