Pakistan is sinking deeper into the political and constitutional crisis triggered by the removal of former prime minister Imran Khan through a controversial parliamentary vote on April 10 this year. Khan’s Pakistan Tehrik e Insaf party delivered a stunning defeat to Pakistan Muslim League of Prime Minister Shahbaz Sharif in the by-elections for the 20 seats of Punjab Assembly. Punjab is Pakistan’s largest province and is considered the power base of Sharifs, who enjoy the tacit backing of country’s powerful military.
The Punjab verdict has changed party position in the provincial assembly where Chief Minister Hamza Sharif, the 48 years old son of Prime Minister Sharif, has lost majority and is expected to lose office to Chaudhary Pervez Elahi, PTI’s candidate for the office. Khan’s PTI and his allies now have the support of 188 MPs against the required 186.
The election for the chief minister will be held on Friday, June 22, under the Supreme court orders. But many in Pakistan fear that the vote may be manipulated or even if Pervez Elahi is elected, the government may not administer oath of office to him on different pretexts, thereby ensuring the young Sharif stays in office.
The Sharif government and its allies at a huddle in Lahore announced to “do all it can to salvage” his son’s government in Punjab. Interior Minister Rana Sanaullah, who himself is facing drug trafficking charges, hinted on July 19 that some members of Punjab Assembly from Khan’s PTI may be taken into custody, ahead of the crucial chief minister election. Reports of horse trading are also making the rouds. Thus, Punjab, which accounts for more than half of the country’s population, may remain unstable despite PTI’s electoral success and its democratic right to get its nominee elected as the chief minister.
The Sharif-lead multi-party alliance rejected Khan’s fresh calls for announcing elections on July 19, insisting that it will complete the term of present assemblies. “The only way forward from here is to hold fair & free elections,” he said on Twitter. “Any other path will only lead to greater political uncertainty & further economic chaos.”
Instability thus is bound to afflict Pakistan for the days and weeks to come unless the military changes its position and withdraws its support to the Sharif government and forces it to announces fresh elections.
The New York Times gave significant coverage to PTI’s victory in Punjab. Sharif’s party “is left in a Catch-22 situation,” NYT quoted Abdul Basit, a research fellow at the S. Rajaratnam School of International Studies, Singapore, as saying in a report on July 18. “If it hangs onto power in the center,” he said, “Shahbaz Sharif will be a lame duck prime minister, while early elections will be a political suicide.”
ECONOMY IN FREE FALL
Political instability is taking a heavy toll on the Pakistani rupee which is in a free fall and is bound to send the struggling economy into a full tailspin. Rupee lost its value against dollar by more than Rs 5 on July 19, driving the stock market to a virtual crash. The Rupee ended July 19 at 222 to a dollar while Pakistan Stock Exchange lost almsot 1000 points, wiping out tens of billions in market capitalization. Even the announcement of a staff-level agreement with Islamabad for the release of 1.17 billion dollars failed to help. Rupee has lost more the Rs 40 to a dollar since the new governmennt took over.
Innflation is at the highest level in the past 14 years. Accoring to Steve Hanke, an economist at John Hopkins University and Senior Fellow and Director of Troubled Currencies Project at cato Institute, inflation in Pakistan is sky high, reaching a staggerig 47%.
Pakistan’s inflation is a sky-high 47%/yr by my measure. Now, PM Sharif is on his knees, passing the begging bowl to the IMF and “friendly” countries. It confirms my School Boys Theory of History: Its just one damn thing after another. https://t.co/dkFDEXc9aJ
— Steve Hanke (@steve_hanke) July 19, 2022
Acccording to former finnance minister Shaukat Tareen, the abrupt fall of rupee is largely due to econnomic mismanagemet and political instability. “We used to tell the powerful quarters that if you create political instabilty, it will create econnomic instability and that economy is going in the right direction,” he told famous journalist Arshad Sharif in a TV show. Economic performance was the best in the past 17 years which was eeven acknnowledged by the Sharif government. According to Tareen, the new governmment has secured fresh loans to the tune of more than 1.65 trillion rupees. In addition the sinking rupee value has added another 5,200 billion rupees in debt. Because of loss in rupee’s value and new loans that the governmeent has secured in the last 100 days, Pakistan’s debt has gone up by a whopping 15%.
“When debt will go up, your debt repayment pressure will go up and will increease inflation even more,” he added. The country’s foreign exchange reserves have dwindled to only $9.8 billion, just enough for five weeks’ worth of imports, according to a report in Reuters.
Because of the tanked economy, ratings agency Fitch has revised Pakistan’s outlook from ‘stable’ to ‘negative’, citing several reasons for the downgrade, including adjustment risks, financing, political risks and declining reserves. In a report issued on Julky 18, the New York-based agency — one of the three major global rating agencies — also affirmed Pakistan’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘B-‘.
Fitch noted a “significant deterioration” in Pakistan’s external liquidity position and financing conditions since the start of the year.
While the ratings agency assumed the International Monetary Fund’s (IMF) executive board would approve the staff-level agreement with Pakistan reached earlier this month, it saw “considerable risks” to implementation.
The agency also saw risks to continued access to financing after the expiry of the extended funded facility (EFF) supported programme in June next year amid a “tough political and economic climate”.
Some analysts in Pakistan do not rule out the imposition of martial law if the ongoinng political crisis continue to take a heavy toll on the economy. Pakistan already has joined a list of handful countries that face the threat of a default. “There is no option other than fresh mandate. The country will contiue to sink into the economic and political crisis as long as this governmment (of Shahbaz Sharif) stays. Sooner or later martial law or a judicial coup may have to be imposed to pull the country out of crisis,” wrote noted columnist Javed Chaudhary in his July 19 Urdu column. Chaudhary says the country will become ugovernable if such extreme actions were not taken. “This time if martial law is imposed, it will stay for 10-20 years,” added Chaudhary.