Pakistan further descends into chaos as the recent bye-elections send shockwaves throughout the political and economic domains.
The bye-elections to 20 Punjab Assembly seats on 17 July have sent shockwaves through Pakistan's fragile political and economic system. It would be an understatement to claim that the results were entirely unexpected. On the eve of the elections, there was virtually a consensus amongst political pundits that the ruling Pakistan Muslim League Nawaz (PMLN) would win a majority of the seats going to the polls. The only argument was about the scale and margin of victory. But contrary to predictions of the pundits, the PMLN has been routed—it has managed to win only four out of the 20 seats. The former Prime Minister Imran Khan, who was ousted in a no-confidence motion in April last, has made a stunning comeback, winning 15 seats, many of these with significant margins. Not surprisingly, Imran is claiming he now has the people’s mandate to back his demand for an early general election.
These elections were important not only because the fate of the Hamza Shahbaz-led PMLN government in Punjab hinged on their outcome, but also that of the federal government in Islamabad led by his father, Prime Minister Shahbaz Sharif. Linked to the survival of the federal government was the question of who would head the all-powerful Pakistan Army come November. Whether or not the current Army Chief Gen Qamar Bajwa got another extension or a new general was appointed depended on how the politics would play out. But most important was the future of the Pakistan economy.
With the economy on the verge of a meltdown, Pakistan desperately needed political stability so that tough economic measures could be taken. A loss for PMLN would mean the end of the economic reforms which could jeopardise the International Monetary Fund (IMF) programme because political survival would necessitate unaffordable and default-inducing populism. After all, one of the primary reasons for the PMLN rout was the steep rise in prices of fuel and other essentials and the impending rise of power tariffs, all part of prior actions mandated by the IMF to restore the Enhanced Fund Facility (EFF) programme.
Simply put, the very stability of Pakistan depended on the bye-elections. The results have, however, made some of the worst nightmares come true.
The brave words of Finance Minister Miftah Ismail that he bit the bullet to save Pakistan from default and bankruptcy have little political resonance among the poor masses. They blame him and PMLN government for bankrupting them to save the elite of Pakistan who hasn’t suffered one tiny bit. Their perks and privileges remain protected while the people are called upon to sacrifice everything. Unlike Ismail, politicians who have to seek a mandate from the people have no use for his ‘stirring’ words and spirit of political sacrifice to save Pakistan from an imminent default.
Simply put, the very stability of Pakistan depended on the bye-elections. The results have, however, made some of the worst nightmares come true. On paper, losing the government in Punjab doesn’t really affect the survivability of the federal government. But administratively and politically, the loss of Lahore to a hostile and confrontationist political adversary makes it extremely difficult, if not impossible, to run the federal government in Islamabad. If PTI has control of both Khyber Pakhtunkhwa and Punjab, Islamabad will be under the perpetual siege of Imran Khan’s cultists.
While efforts are underway to ensure that Hamza’s survives by hook or by crook—Hamza has for now survived using a constitutional and judicial technicality—both Punjab and Pakistan are going to be in the throes of prolonged instability. The chances of things spiralling out of control are very high. If Imran eventually grabs Punjab, it will be impossible to run the federal government; if Hamza manages to survive, Imran will let loose mayhem on the streets of Pakistan, making governance and economic reforms impossible; if the army intervenes directly or indirectly, it will have its own political, economic, and diplomatic repercussions, including sanctions that will precipitate the economic meltdown.
The problem is compounded by the fact that the position of Army Chief Gen Qamar Bajwa looking extremely shaky. Worse, the army’s ability to manage and control politics appears to have whittled down. Gen Bajwa getting another extension is now looking less and less likely regardless of whether or not the Shabaz government survives till November when Bajwa’s current tenure ends. Although Gen Bajwa had issued instructions to the rank and file to stay away from politics, the Army will not be able to wash its hands off the election rout and pretend it is business as usual. Imran Khan has been going after the top brass no holds barred. Albeit obliquely, Imran has accused Gen Bajwa of being a ‘Mir Jafar’, i.e., a traitor who played a role in the alleged US-sponsored conspiracy to effect regime change in Pakistan. The PTI has unleashed its troll armies who have been targeting the top brass, something quite unprecedented in Pakistan.
Surprisingly, the army which normally crushes any such activity is finding itself helpless. One reason could be the whispers in corridors of power and references in the media of differences, even divisions, within the army over Imran Khan—some see him as a megalomaniac who is dangerous for the country and for the domination of the army, others see him as the only hope for pulling Pakistan out of the morass it finds itself in. While he was in office, Imran Khan depended on the military to bail him out on multiple occasions. But now he feels that he no longer needs the crutches of the military and therefore can take on the ‘establishment’, even make it kowtow to him. For the military brass, the dilemma is that if it takes any action against Imran, it risks not only the divisions within the Army’s rank and file coming out in public but also the possibility of large-scale disturbances in favour of Imran; on the other hand, if the army does nothing, Imran will not only destabilise the government but will also go after the military brass and meddle in affairs of the army by playing the generals against each other, destroying the coherence of the only really functional institution in Pakistan.
Politically, the election debacle has made many existing and potential allies very jittery. Suddenly, PMLN doesn’t look like the sure-shot winner in the next general elections. Politicians who were looking towards the PMLN to ride to power are rethinking their political stand. Murmurs of discontent are already being heard from inside the ruling coalition. Although publicly coalition partners have declared that the government will serve the remainder of the term of the National Assembly, behind the scenes there are reports of allies becoming restive. Whether or not they desert will depend on the signals they get from the military establishment. If the army reaches the conclusion that the government in Islamabad is untenable and early elections inevitable, then the smaller parties like Muttahida Quami Movement (MQM) and Balochistan Awami Party (BAP) will pull out their support and force elections later this year, perhaps by October. Otherwise, this government will limp along. But for now, it looks rather difficult that it will last until August next when the current National Assembly completes its term.
The impact of the political uncertainty unleashed by the bye-election results is already being felt on the economy that now is tanking at an alarming pace. In the five days since the results, the Pakistani rupee has already weakened by almost Rs 25 to a US dollar (over 10 percent) and is trading at 230. In the open market the US dollar is not available at even 240. To arrest the fall of the Rupee the State Bank of Pakistan has stopped releasing funds to importers which has further fuelled speculation in the foreign currency market. According to some reports, 60 odd critical medicines have vanished from the market. International credit rating agencies have downgraded Pakistan, making it extremely difficult to get commercial loans. International financial markets are already anticipating default and yields on Pakistan's bonds have crossed 50 percent. Pakistan's ‘friends’ are not stepping forward to bail it out. Price inflation of essential commodities is at a record high of 33 percent. The policy rate of the State Bank of Pakistan is 15 percent, which means that trade and industry are having to bear interest rates of 17-20 percent. Meanwhile, power tariffs are yet to rise and given the fall of the rupee, power and fuel prices are likely to rise further and fuel even more inflation.
But in Pakistan the impending economic collapse is a sideshow. The main focus remains political tug-of-war. It is almost as the people and power elites have a death-wish. Pakistan today resembles the Mughal empire in its last days where even when invaders were marching on Delhi, the nobility was engaged in court intrigues to decide who would become the Wazir. As things stand, the ruling coalition in Islamabad is now caught between a rock and a hard place: it cannot afford to call an early election because the bye-election results suggest that the political wind is behind Imran Khan; but in the face of an opposition running rampant, the ruling coalition will find it impossible to administer and govern, much less deliver anything to the public to recoup its political capital.
Clinging on to the federal government will mean having to keep administering more bitter economic pills to keep the economy from falling off the rails. This will almost certainly invite even greater unpopularity. It is highly unlikely that the economy will turn around before the elections late next year, as is being hoped and claimed by people in favour of running the government. If, however, the government resorts to populist economic measures, it will not only risk pushing the economy over the edge but also invite the ire of multilateral financial institutions and of bilateral partners. In the event, it will be the worst of both worlds, or to use the colloquial expression ‘eating a 100 onions, getting a 100 lashes’.
The bottom-line is that prospects for the Shahbaz Sharif government surviving till August 2023 are next to nothing. Chances are that the government will not survive more than a few weeks, at best a couple of more months. But if elections are forced, it will mean the entire country is in a limbo for at least around three months.
The bottom-line is that prospects for the Shahbaz Sharif government surviving till August 2023 are next to nothing. Chances are that the government will not survive more than a few weeks, at best a couple of more months. But if elections are forced, it will mean the entire country is in a limbo for at least around three months. This time is critical because the survival of the economy will be decided in these three months. Although the IMF has announced that it is open to dealing with a caretaker government in office, politicians heading for polls will refuse to own these steps and in fact promise that they will overturn these measures if they win. In other words, the steps taken by the caretaker will have no credibility with the international financial institutions. Also, no decisions on the economic or administrative or even diplomatic matters will be taken by the bureaucracy which will wait for the next government before it moves.
Neither Bajwa nor anyone else has the political heft left to engage in anything substantive with India. The Pakistan Army is no longer singing from the same song sheet and the word of the army chief means little because there is no longer any consensus behind what the chief decides
For India, the unfolding scene in Pakistan holds many lessons. The eternal and incorrigible optimists who saw a window of opportunity opening for re-engaging Pakistan need to wake up to the fact that the proverbial window has already closed. The investment made in engaging with Gen Bajwa and the Pakistan Army is unravelling. Neither Bajwa nor anyone else has the political heft left to engage in anything substantive with India. The Pakistan Army is no longer singing from the same song sheet and the word of the army chief means little because there is no longer any consensus behind what the chief decides. Even otherwise, there is no guarantee that Bajwa’s successor will either be committed or interested in upholding what Bajwa has agreed. Rather than wasting time on fruitless engagement with the Pakistan Army, the interests of India will be better served by utilising its resources to prepare for the security, strategic, and diplomatic fallout of a possible economic collapse in Pakistan.
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Sushant Sareen is Senior Fellow at Observer Research Foundation. His published works include: Balochistan: Forgotten War, Forsaken People (Monograph, 2017) Corridor Calculus: China-Pakistan Economic Corridor & China’s comprador ...
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