2022 In Perspective
As Pakistan entered the year 2022, there were two adverse signs: the fall of the Afghan government and the beginning of an economic crisis. These blows came rapidly. Terrorist attacks had grown across the country; before the end of the year, Balochistan’s militants also stepped up their violent activities and formally linked up with the TTP.
Pakistan’s economy only expanded by a pitiful 2 percent in 2022, and as of right now, its foreign reserves are at a dangerously low level of less than $4 billion, which is insufficient to pay for even one month’s worth of imports. In 2022, widespread flooding spurred on by monsoon rains and melting glaciers resulted in 1,700 fatalities and billions of dollars in damage. Two million homes, infrastructure, and animals were all destroyed by the floodwaters. Numerous sectors, including Pakistan’s main export—textiles—shut down their plants due to a lack of access to electricity and natural gas.
Pakistan’s politics also started to fall apart. The economic crisis put Imran Khan, the former PM elected in 2018, under strain, as did a growing conflict with the nation’s potent military. In response to the opposition’s no-confidence motion, Imran Khan urged the president to dissolve the National Assembly and call elections, which led to a constitutional crisis.
Shehbaz Sharif was ultimately chosen to succeed Khan by the same parliament on April 11 after Khan lost a no-confidence vote, making history as Pakistan’s first prime minister to do so. On the foreign policy front, however, Pakistan was able to remove the nation from the Financial Action Task Force (FATF) grey list, free the country from Mr. Khan’s bizarre allegations that the US was complicit in his defeat in the parliament, and make a compelling case for the climate catastrophe.
Gloomy Economic Situation
Prices for gas and electricity cannot continue to rise at the current pace. The IMF will compel the up till now recalcitrant Nawaz Sharif-Ishaq Dar team to increase gas and electricity costs. Saudi Arabia might yet be able to provide a stopgap between now and the inevitable inflationary spiral that will develop if the price of gas, electricity, gasoline, and diesel is revised upward.
On a global scale, gasoline prices are important but Pakistan has multiple issues with the pricing of gas, electricity, and fuel: historically low and heavily subsidized prices, an unsustainable overvalued Pakistani rupee, and a domestic fiscal profile including circular debt that severely limits the state’s ability to spend money.
The larger unsustainable nature of the economic system will be attributed to the 7th National Finance Commission Award and the 18th Amendment. None of these actions will be able to persuade lenders and donors that investing in Pakistan will be beneficial. Every bureaucracy on the planet is aware of the strengths and weaknesses of Pakistan’s dinosaur decision-makers. Ishaq Dar’s inability to persuade outside parties of the viability of their ideas, however, won’t be the main economic obstacle.
The suffering Pakistanis will experience is internal. In 2022, inflation ruined the household spending of the poor and the nearly poor. It will rip into the urban middle class’s well-being in 2023 with a ferocity that cannot be stopped. The fifth-generation warfare-focused state components and the poor communications wings of the PML-N or PPP will not be able to mitigate the hit. In 2023, efforts to lessen the effects of economic distress in Pakistan will be made too little, too late, and inequitably.
Interminable Toxic Politics
Even if the government miraculously manages to produce significant mitigation measures, the politics surrounding the economic crisis that Pakistan will experience in 2023 will be more complicated than the problems Mr. Khan presented to the ruling party and the national security establishment in 2022.
It’s uncertain when the National Assembly will disband and an interim administration takes over because the ruling coalition is determined to maintain control for as long as possible while the nation deals with an economic crisis, an environmental catastrophe, and a credibility crisis.
If elections are held in October, it’s unlikely that any party would win a majority in the elections. Despite being the most probable candidate to win, the Pakistan Muslim League (PML-N) will not win a simple majority. The next government will therefore be formed by a fresh coalition that is comparable to the one that is now in place. However, coalition partners may use such a government as leverage in a political blackmail scheme.
Due to opposition from its coalition partners, it would be nearly impossible for it to make very difficult decisions, such as a significant and costly reform program, without which Pakistan would cease to be a functioning state. The political instability that Pakistan is plagued by, which is an adversary of reform, will persist, in the end. The Pakistan Muslim League (PML-N) is anticipated to be the winning party, but it will not win a simple majority.
As the elections draw nearer, the government would be tempted to indulge in financial overspending, declaring new development projects, launching new initiatives, and offering freebies and perks to cultivate their vote banks and constituencies. Such populism has no place in the budget at all. In fact, providing any relief in the form of subsidies or tax reductions could just accelerate the situation past the point of no return.
War on Terror
Combating the menace of terrorism is another concern. Given the empty treasury and the dysfunctional polity, there are no good solutions available in this situation either. The Army may engage in offensive operations against the Tehrik-e-Taliban Pakistan (TTP) and other armed opposition groups operating within Pakistan. However, these operations will continue indefinitely as long as safe havens are present in Afghanistan.
Attacking the havens of terrorism is the alternative choice. Operations inside Afghanistan will result from this, pitting the Taliban against Pakistan. The destabilization will be unabated, and Pakistan’s entire western border will turn into a battleground.
Holding discussions and negotiating a resolution with TTP is still another choice. However, doing so entails ceding control to the TTP, and will set off a chain of events that will ultimately lead to the collapse of the Pakistani state.
Flood victims are still in need of help, nearly 90,000 people are still without a place to live more than four months after the worst flooding, and floodwater is still standing in some places. To recover from such a catastrophe and reconstruct damaged infrastructure, such as roads and schools, would be incredibly tough for any country, let alone one whose government is already facing financial difficulties like Pakistan’s.
The increased economic fragility of the typical Pakistani, along with the delegitimization of traditional politics and the larger Pakistani “system,” would perfectly support the objectives of Pakistan’s most dangerous strategic rivals. India is at the top of this list, but there are also ideological extremists in Tehran, Kandahar, Kabul, and other mountainous areas where Daesh has territory under its control.
Pakistan’s distinct national identity and ethos survived the first war on terror in part due to the support and investment of key global constituencies (such as the US military-industrial complex) in Pakistan’s success. There is a considerably reduced chance that Pakistan’s suffering will be showing up on the important global radars as a result of China-US competition and early results from Russia’s invasion of Ukraine.
We can see how crucial India is to the current economic and technological decoupling that is occurring throughout the global supply chain. From a peak of more than 60,000 employees in 2013 to just fewer than 10,000 by the end of 2022, Samsung’s headcount in China has decreased. In recent years, it has shifted the majority of the production of its phones from China to Vietnam and India, where they are no longer made.
Nearly 8% of all iPhones are currently produced in India, up from no iPhones being produced there in 2017. It is anticipated that 25% of all iPhones will be “Made in India” by 2025. In order to strategically respond to all of this, Pakistan needs to determine its best choices.
What follows then? The military is still being pressured by domestic militancy. Debts have due dates approaching. The peak of the political drama in Pakistan has undoubtedly not been achieved because the country is one of many scheduled to have national elections in 2023, somewhere between August and October. The general public has already begun to prepare for another season of harsh weather.
In 2023, it’s likely that things will be considerably worse for the people of Pakistan. Given that this is expected to be an election year, the chances of the economy improving or even stabilizing are almost nonexistent. Politicians don’t seem to have any ideas about how to improve the situation, much less a plan.
It appears that the government is only capable of making minor adjustments to the issues rather than implementing reform that will save the situation. The Army, which will be engaged in combat on both the political and militant fronts, will be closely monitoring the state’s ongoing decline with great anxiety.
There won’t be much done to help the flood-affected communities, in part because there isn’t any money and in part, because the majority of those areas don’t really matter politically or economically and can therefore be disregarded.
The outlook for 2023 is significantly worse. The state is trapped in a maze as a result of attacks by the Baloch separatists and the Pakistani Taliban and their supporters. In the current year, state authority, legitimacy, and resources will be put under extreme strain. To address the interconnected political, economic, and security imbroglio, Pakistan will need visionary leadership, a functioning parliament, fundamental policy reforms, and some level of sacrifice from its elites in 2023.
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