Pakistan on the boil

Fresh bout of political instability compounds the problems of the economy in free-fall.

pakistan, imran khan
Imran Khan (IE)

The arrest of former prime minister Imran Khan has led to civil disorder conditions in Pakistan that is already reeling from multiple shocks like climate change, Covid-19 pandemic, ongoing conflict in Ukraine, and the slowdown in the global economy. Unprecedented scenes in the country were witnessed as angry supporters of Khan’s Pakistan Tehreek-e-Insaf party took to the streets, even storming the all-powerful army’s general headquarters in Rawalpindi and torching a corps commander’s residence in Lahore. After surviving an assassination attempt on his life last year, Khan has been taking on the army—which wields the real power in the country—including the former chief for withdrawing support to his government. In end-October, there was even an unprecedented press conference by the head of the Inter-Services Intelligence agency to respond to Khan’s efforts to malign the army. The truth is that Khan became PM with the army’s help but fell out as he chose to read from a different script. This happened to his predecessors as well. The big question is how the army responds to the arson unleashed by Khan’s supporters. As the situation is highly fluid, all bets are off for now when the national elections will be held and whether Khan can make a renewed bid to come to power. How long the political instability lasts has a crucial bearing on whether it forces the army’s hand to take charge for the fifth time.

Pakistan on the boil is bad news for the ruling Shehbaz Sharif-led administration to address the festering economic crisis that brought the country to the doors of the IMF for a bailout. The country confronts a severe balance of payments crisis with reduced foreign exchange buffers—with only few weeks of import cover—to purchase essential imports like food, fuel and other items. Dealing with the worst floods in recent memory—which have affected over 9.4 million acres of crops and 33 million of its people—Pakistan’s economy is likely to register growth of only 0.4% in 2022-23 (July to June) from 6% in the previous fiscal, implying negative per capita income growth and worsening poverty. Prospects are for growth of only 2% in the coming fiscal as low forex reserves constrain economic activities according to World Bank’s South Asia Economic Focus. As if all of this weren’t bad enough, inflation is now the highest in the South Asian region at 36.4% in April. Food inflation of course is much higher at 48.1%, the highest since FY16, with the rural areas facing the full brunt of the surging prices of essentials. To cope with mounting economic pressures, Pakistan secured an IMF package of $6.5 billion but disbursements were suspended last November due to limited progress on loan conditions.

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The long shadow of the prospect of martial law due to the instability triggered by Khan’s arrest is not good news either for the free-falling economy which needs crucial reforms to revive it. This will make it even more difficult for securing the much-needed disbursement of $1.1 billion from the IMF package. Pakistan needs the imprimatur of the Fund to access international loans to meet its external financing requirements to meet its current account deficit and debt service to avert default. It needs to immediately pay $4 billion on its debt till June this year while its reserves are only $4.5 billion.

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First published on: 11-05-2023 at 04:30 IST