ISLAMABAD, Pakistan — A year of political instability, which led to the arrest of former Prime Minister Imran Khan this week, has crippled Pakistan’s economy, plunging millions into poverty and leaving the country on the brink of default.
ISLAMABAD, Pakistan — A year of political instability, which led to the arrest of former Prime Minister Imran Khan this week, has crippled Pakistan’s economy, plunging millions into poverty and leaving the country on the brink of default.
The deadly protests, the jailing of senior members of his party, and the deployment of troops since his arrest are likely to hasten this economic decline. More than 3,500 of Mr Khan’s supporters were arrested this week, according to police.
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The deadly protests, the jailing of senior members of his party, and the deployment of troops since his arrest are likely to hasten this economic decline. More than 3,500 of Mr Khan’s supporters were arrested this week, according to police.
A court in Islamabad on Friday granted Mr Khan release on bail after the country’s Supreme Court ruled Tuesday the manner in which he was arrested was unlawful.
The confrontation between political parties and a coup-prone military has even split the judiciary, which might have been expected to settle the conflict. The struggle has been so fierce because the authority of the military, which has dominated Pakistan almost since its inception in 1947, is being attacked on an unprecedented scale.
Over the past year, Pakistan’s foreign exchange reserves have been drained while the International Monetary Fund has suspended its bailout plans for the second time.
Mr Khan was deposed in April last year. His successor as prime minister leads a shaky coalition that must hold national elections this year and is reluctant to make unpopular decisions that are necessary for the sake of the economy. Inflation has topped 35% with the rupee losing half its value against the dollar as industrial production has fallen.
“The main culprit is political instability,” said Mohammed Sohail, chief executive officer of Topline Securities, a Pakistani stockbroker. “Successive governments have focused more on their survival than on managing the economy.”
An end to the chaos is not in sight. The government has initiated about 150 cases against Mr Khan. His successor, Prime Minister Shehbaz Sharif, has defied a Supreme Court order to hold a key regional election, a move that could prompt the court to impeach him.
Mr Khan’s ouster – for which he blames the military – has roused support around him and his call for new elections, sweeping the country into protests for more than a year.
The army has admitted to intervening in politics in the past – it has seized power four times – but now denies political interference and says it is neutral.
Compounding the political situation, last summer’s catastrophic floods cost the country an estimated $30 billion, while domestic terrorist attacks also skyrocketed.
According to the Asian Development Bank, Pakistan’s economy is expected to grow just 0.6% in 2023, compared to an average growth of 4.8% in developing countries in Asia. The bank forecasts that Pakistan’s annual inflation rate this year will be the worst in Asia.
The South Asian country’s 75-year history has been marked by cycles of military rule; the last ended in 2008. But even when the military wasn’t in power, it sought a flexible civilian administration, according to analysts, who say the army helped Mr Khan take office in 2018.
As prime minister, Mr Khan tried to assert himself against the generals but lost military support in the process. To bolster public support, Mr Khan introduced fuel subsidies that the IMF deemed unaffordable. In return, the lender suspended its rescue package. Two months later, Mr Khan lost a vote of confidence in Parliament and, like all other Pakistani prime ministers before him, failed to complete his term.
Pakistan’s foreign exchange reserves stood at US$4.4 billion in early May, just enough to cover a month’s imports after falling below US$3 billion in the previous weeks. According to the country’s central bank, debt repayments due in May and June total $4.8 billion. How Pakistan will pay off its debt after June is unclear, experts say.
The country’s finance minister, Ishaq Dar, who did not respond to a request for comment, insisted Pakistan would not default.
“The current government has inherited severe economic challenges and has made the difficult decision to return to the path of economic stability even at great political cost – even in the year of general elections,” Mr Dar wrote in a column in a local newspaper this month.
Pakistan is being kept afloat by short-term loans from its allies Saudi Arabia, the United Arab Emirates and China, urging those countries to allocate billions more urgently. Import restrictions – to save foreign exchange – hurt industries that depend on imported raw materials.
Exports are contracting and output from major manufacturers fell 12% yoy in February.
“Rather than doubling the economy, this regime has stepped up its efforts to silence Imran Khan,” said Taimur Jhagra, who served as provincial finance minister under Mr Khan. “And the Pakistanis literally paid it.”
In contrast, Mr Khan’s attitude towards the military has become more severe.
Mr Khan blamed the military and government for an assassination attempt at a rally in November, in which he injured his leg. The army and government deny involvement.
Following the example of the former prime minister, his supporters have been attacking the military publicly and on social media for months. When Mr Khan was arrested, protests targeted military property and installations, drawing troops into the streets and urging the army to “react strongly” if such actions were repeated.
Authorities are considering an emergency rule that would prevent elections, officials said. According to experts, a military takeover remains possible.
Mr Khan identified army chief General Asim Munir as his current opponent in his speech to reporters in court on Friday. Mr Khan said he had been removed from office by General Munir’s predecessor. The military denied the allegation.
“General Asim Munir and under him the senior army leader support democracy wholeheartedly,” said Maj. Gen. Ahmed Sharif Chaudhry, the military spokesman. “There’s no talk of martial law.”
Some government officials say the military has decided Mr Khan cannot become prime minister again. However, Mr Khan is by far Pakistan’s most popular politician. A poll by local polling firm Gallup Pakistan in March found him nearly 30 points ahead of his nearest rival.
The aim of the government and military, says Mr Khan’s party, is to oust their leader from politics before elections are held in October. A conviction following his arrest on corruption charges would prevent him from becoming prime minister again. Mr Khan denies any wrongdoing.
The military did not respond to a request for comment. The government says it is ready to negotiate with Mr Khan on a date for holding regional and national elections on the same day later this year. It said Mr Khan is facing legal proceedings and that he jailed many of his political opponents while in power.
“This is the worst kind of demagogy, the worst kind of fascism. “He is spreading anarchy, chaos and destruction in the country just to avoid responsibility,” Ahsan Iqbal, the planning minister, said this week.
Experts say Pakistan is headed for default without an IMF bailout.
The government briefly rejoined the IMF deal last summer, but then concluded that the terms – including raising electricity and petrol prices and raising taxes – hurt its public support and withdrew from the deal.
The IMF said earlier this month that it was waiting for Pakistan to borrow additional funds from other sources and also announce a supportive annual budget before resuming the bailout.
Pakistan has one of the highest inflation rates in the world, rising to 36% in April from 13% in March last year. This compares to 6% in neighboring India in March this year. Pakistan’s food inflation is around 50%, despite the central bank raising interest rates to 21%, the highest level in the country’s history.
According to the World Bank, nearly four million people fell below the poverty line last year, surviving on less than $3.65 a day.
Pakistan’s once thriving middle class has also suffered.
Malik Abdul Kareem has two small businesses in Islamabad – a workshop that repairs car air conditioners and a food shack. The profits had enabled him to climb into the middle class. But as households scale back spending, he estimates business is down 60% year-over-year.
Standing on the sidewalk one afternoon, he pointed to his 15-year-old Honda car and said it was for sale. Instead, he would ride his motorcycle again to save on gas. He is considering emigrating to Australia.
“If this country catches fire, there will be nothing left,” said the 53-year-old. “They put a gun to my head and now I have no choice but to fight.”
Write to Saeed Shah at [email protected]
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