How Pakistan suffers dismal economic scene, terrorism challenge and a political military

Pakistan is placed in a difficult cleft stick with the International Monetary Fund (IMF) imposing tough conditions during the recent long drawn talks in Islamabad (2- 9 February, 2023), forcing the Pakistan Democratic Alliance (PDM) government to enforce yet another unpopular price hike of cooking gas, from Rs 620 per mm Btu (British Thermal Unit) to Rs 885. The General Sales Tax (GST) rate too has been raised to 18 per cent. These steps were needed to meet the additional tax revenue demand of Rs 170 billion insisted upon by the IMF, as `permanent tax measures’. President Alvi threw a further political spanner in the works by refusing Finance Minister Ishaq Dar’s request to implement these measures through an Ordinance, under Art 89 of the 1973 Constitution. Pakistan has now returned the draft of the Memorandum of Economic and Financial Policies (MEFP) to the IMF, hoping for a quick follow up on concluding the Staff level agreement, before it can hope to get the additional $1.16 billion aid disbursed to ease its depleted coffers. The “perfect doom” loop Pakistan’s economy faced three major challenges - falling growth/output, continued balance of payment pressures, and strong inflation. These problems exacerbated due to government intervention in restricting imports. At one stage recently, the Pakistan Shipping Corporation was unable to trade as its Letters of Credit stopped being honored. There was a shortage of much-needed dollars, with fluctuating rates in the `grey market’ giving birth to an illegal market of foreign currency. This ultimately forced the Exchange Companies Association of Pakistan (ECAP) to remove the cap on the US dollar. Today 1 USD is trading at Pak Rs 267.64. The attempt at closing the trade gap led to (a) reduced economic output, and (b) further pressures on the balance of payments as exports started drifting down, a situation vividly described by well known economist, Dr. Atif Mian, currently Professor of Economics, Princeton University, USA as Pakistan’s “perfect doom loop”. Persisting domestic political polarisation Two different impulses jostle against each other in Pakistan today. With the Punjab and Khyber Pakhtunkhwa (KP) provincial assemblies dissolved and the present government led by Shehbaz Sharif facing pressure from the Higher Courts, there is uncertainty about how long it can last or how long it can push back a general election. Underwriting this uncertainty is even greater doubt on whether the election can end, or even bridge, the political divide that has transformed Pakistan’s political spectrum into a virtual combat zone between the Pakistan Tehreek-e-Insaf (PTI) on one side and the Pakistan Muslim League (Nawaz) and the Pakistan People’s Party on the other. Imran Khan is doggedly maintaining that his tenure can in no way be blamed for having brought the country down to this sorry impasse. TTP resurgent Behind this gloomy economic scene is the brooding presence of the Army. Pakistan has to cope with a spate of terror attacks on its pickets along the western border, both in Khyber Pakhtunkhwa and Balochistan, by a resurgent Tehrik e Taliban (TTP), which had been mollycoddled during negotiations led by former XI Corps Commander, Lt. Gen Faiz Hameed, now forced to retire in some ignominy. Currently, its leadership under Noor Wali Mehsud seems galvanized and able to weld together activity of its different factions against the State. The recent attack on the Police mosque in Peshawar caused consternation in police and public morale. Army and economic situation The Army has always been reluctant to consider any budget cuts though in the last few years the economic crunch has forced it to limit its appetite for more. A brief overview of the defence budget is given below: Year     US $ bn         Percentage of GDP 2019    10.39                 4.11 2020    10.38                 4.02 2021    11.3                    2.8 2022    7.5                      2.2 No civilian government, usually midwifed into power by the Military, has been able to pressurize the Army to accept too many unpalatable expenditure cuts. This trend may continue. What will the Army do? On the bitterly polarised domestic political front, withdrawal of the military establishment’s benevolent hand has forced Imran Khan to do a U-turn on his narrative of martyrdom through an alleged foreign (read US) conspiracy, though he remains prone to belittle the outgoing senior Army leadership. His efforts to build bridges with the new Army leadership under Gen Asif Munir have not yielded any breakthroughs. The latter has been circumspect, addressing the difficult terrorism escalation on the Western border as also perceived divisions within middle and senior Army echelons on whether to support Imran’s return to power. The recent political engineering to unify the Mohajir Quami Movement (MQM) factions in Karachi in prelude to the much delayed Local Body elections there, indicated a clear attempt to whittle PTI influence in the greater Karachi agglomeration. In fact, through the recent arrests of Fawad Chaudhry and Sheikh Rashid, a message has clearly been conveyed to Imran Khan that he better behave in a more civil manner, eschew unparliamentary language and curtail his frequent press appearances, even as his hitherto `teflon coated’ popularity has started to wear thin. Though in recent statements, the military leadership has professed an intention to remain apolitical and neutral in the political arena, in the peculiar political environment of Pakistan this is not a realistic objective. The military cannot stop dominating the decision-making process about internal security situations, it cannot withdraw from its diplomatic role and it cannot reduce its public profile in the media or in civil society. Imperatives for India Economic bailouts will eventually ensue in Pakistan and its debt repayment schedules may be alleviated in the short term. However, these measures may not succeed in turning the weak or bleak scenario overnight. Meanwhile, there is no evidence visible of renunciation of support for cross border terror networks to trouble India in Kashmir or through pro-Khalistani elements in Punjab. The writer is a former special secretary, Cabinet Secretariat. Views expressed are personal. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.