The price Pakistan must pay for uncertainty

The political set up in Pakistan, resulting from a no-confidence resolution against the Imran Khan led coalition government, has not been able to settle down and go about its routine work. The latest verdict by the Supreme Court that members of the parliament cannot deviate from their party position, during a no-confidence move, has added to the myriad challenges faced by the incumbent government. Pakistan’s economy, already fragile, has been negatively impacted by this uncertainty. The value of the Pakistani rupee has fallen against foreign currencies and the stock market is bearish. Inflation has made the lives of common citizens not only spartan, but difficult as well.

Apart from the political imperative of keeping various coalition partners happy, the government has to take tough decisions like the withdrawal of the petroleum subsidy in order to seriously engage with the IMF. These decisions will have a political cost as prices of consumer goods will further go up. Therefore, the government wants coalition partners and the establishment to take joint ownership of the decision. Whether they will oblige the government remains to be seen. The Shehbaz Sharif led government meanwhile faces serious political and economic challenges. Uneasy lies the head that wears the crown, they say.

While the government in Islamabad is fragile, the one cobbled up in Lahore, with the help of dissidents, is literally falling apart. The Supreme Court’s constitutional interpretation that votes of dissidents have no validity in a no confidence motion, election of prime or chief ministers and monetary bills, has cast doubts on the election of Hamza Sharif, son of the Prime Minister, as Chief Minister of the largest province. His election was contentious from the beginning and he has not even been able to form a cabinet. As a result, Punjab right now is suffering from an administrative paralysis. This does not augur well for the ruling Muslim League which has the bulk of its vote bank in Punjab. As I write these lines, the Election Commission has decided to de-seat 25 provincial assembly members who belonged to Imran Khan’s PTI but had voted recently for Hamza Sharif.

One positive outcome of the current political turmoil is that we may witness less and less change of political loyalties in future.

Javed Hafeez

Economic activity is often directly affected by political instability. Investors cannot take long term decisions for lack of governmental policy clarity and its sustainability. Similarly, consumers get worried and start hoarding money thinking that the worst is yet to come. This results in lower aggregate demand that discourages new production. It sets in a recessionary phase of economy. The overall economic sentiment takes a hit and we are already seeing that happen through stock market indicators. Pakistani investors are waiting for political stability and an end to the current uncertainty.

Some people say Pakistan is headed towards the Sri Lankan situation. I do not agree with that assessment. Firstly, Pakistan’s economy is larger and more resilient. Pakistan has a large informal economy which can be brought into the tax net. The bulk of Pakistani investments are trapped in the real estate sector which is largely unproductive. Speculative business in this sector should be discouraged and construction encouraged. Taxation of large unbuilt residential and commercial plots can give substantial dividends. The introduction of innovative foreign currency deposit schemes within the country could also ease the financial woes of the country, to an extent.

Imran Khan, buoyed by recent decisions, is pushing for early elections. He has announced a mass march to Islamabad, adding to the worries of the incumbents. The emotionally charged political strife that we witness day in and day out does not augur well for the economy. IMF, currently holding talks with the incumbents in Doha, would like to see a credible set up in Islamabad for any substantial deal. It is therefore essential that early elections are held to clear the air of uncertainty.
One positive outcome of the current political turmoil is that we may witness less and less change of political loyalties in future. This healthy development will contribute to political stability. Acute political polarization that is palpable today has been strengthened by those shifting their loyalties from one party to the other. The Supreme Court has rightly pointed out that such practices weaken political parties. When a candidate gets votes in the name of a certain political party, he or she should not disregard party direction while voting in crucial matters in the parliament.

The current polarization and blame-game must end in the greater national interest. If that is not ensured sooner than later, the country can lurch into chaos which would be disastrous. This grave situation demands the closing of ranks and joining hands to find solutions of grave and urgent problems. All national institutions and political parties must rise above their own interests and unite to serve Pakistan. The current wave of nationwide popularity must not mislead Imran Khan. These defining moments in Pakistan’s history are a test of its leadership.

– Javed Hafeez is a former Pakistani diplomat with much experience of the Middle East. He writes weekly columns in Pakistani and Gulf newspapers and appears regularly on satellite TV channels as a defense and political analyst.

Twitter: @JavedHafiz8