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Pakistan’s blind alley

March 26, 2023

Islamabad: Amid the government’s relentless pursuit of the Imran Khan led opposition, a failure to secure an urgently needed IMF loan has led to just one conclusion – Pakistan becoming locked in a blind alley with no safe exit in sight for the foreseeable future.

Together, increasingly toxic politics and a rudderless economy have spelt the biggest disaster to surround Pakistan in its history.

This dangerous outcome has followed a series of events during the almost year-long tenure of Prime Minister Shehbaz Sharif. In the process, Khan who was once discredited for overseeing a number of blunders in his tenure, today stands vindicated as the most popular figure across Pakistan’s political landscape.

And recent official political blunders ranging from a heavy police crackdown on opposition activists to an ill-conceived attack on Khan’s home in Lahore, have simply backfired. Irrespective of the spin from government leaders, the opposition’s popularity continues to surge in spite of the odds against them.

Even the choice by the Election Commission of Pakistan (ECP) to controversially jump in the fray, reversing the Supreme Court’s mandated election date in the Punjab and Khyber Pakhtunkhwa provinces, has failed to alter the public’s mood. Consequently, the apparent defiance of a Supreme Court date has landed the ECP and Pakistan’s very future in uncertain times without precedence. Exactly how the future unfolds from here onwards remains mired in deep uncertainty.

More critically, the government has failed to secure Pakistan’s return to the IMF’s loan program, notwithstanding repeated promises of ‘an IMF deal about to conclude’ line from finance minister Ishaq Dar. Concluding a staff level agreement or SLA with the Washington based lender remains the critical first step towards a request from the IMF’s management to the fund’s executive board for approval of a U$1billion disbursement.

Though the billion dollars in itself may just be a modest figure to fill Pakistan’s yawning external funding gap, it is the critical lifeline to rescue the country from a possible default on foreign currency payments. The IMF’s stamp of approval is necessary to convince lenders including the so-called friends of Pakistan to bail out Islamabad.

Ironically however, the delay in such gestures notably from friends in the Middle East, squarely points towards a fast emerging fresh reality. It suggests skepticism among Pakistan’s proverbial friends notably Saudi Arabia and the UAE, apparently seeking a clearer path to the country’s political and economic future. In a nutshell, Pakistan suffers from gaps on both of those fronts.

A safe exit from Pakistan’s dangerous present broadly requires urgent compliance on two equally formidable fronts. On the one hand, a return to a semblance of rule of law and abidance by the constitution is necessary to carve out a sustainable way to the future. In the absence of such an outcome Pakistan lives in extreme danger of becoming locked in growing anarchy.

With just over six months to go till the ECP mandated date for elections in October, it is vital to urgently review this arrangement. Clearly, Pakistan’s present day turmoil has strengthened the case for fresh parliamentary elections under a neutral government to ensure a fair outcome. Such a consequence however requires the installation of neutral caretaker governments at the center in Islamabad and Pakistan’s provinces, to pave the way for a political transition.

On the other hand, rescuing Pakistan’s economy from its fast paced drop into the unknown is essential to tackle the biggest risk to the country’s very future. The past few months under the leadership of finance minister Ishaq Dar have witnessed an accumulation of a series of disasters.

Today, running the economy by gimmicks rather than sensible action has led to a deadlock all around. The latest indication of the IMF questioning the methodology of the politically charged fuel subsidy plan points towards a deeper challenge.

In an election year, the government appears determined to offer sops to win votes, overlooking an urgent need to fix the twin problems of narrowing the deficit and tackling the pressure on the external front. A similar case arguably includes subsidies on food items for supposedly low income consumers during Ramazan. Such initiatives in the past have been abused to the extent that their reliability of execution remains in question.

And fixing Pakistan’s resource gap through forcing more taxes on the untaxed or partially taxed remains the key to rescuing the country’s future. At a time when even oil rich economies of the Middle East are turning to domestic tax measures in building themselves for a post-oil future, Pakistan’s rich and mighty cannot remain immune from sharing the burden. This raises a formidable question – can today’s politically challenged government in Islamabad, locked in an election year, take unpopular steps to save Pakistan’s destiny?