Will Pakistan go the Sri Lanka way?
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Sri Lanka, an island nation that topped the social development index in South Asia, has witnessed an economic collapse. Its leaders have declared bankruptcy after defaulting on external loans. Fuel, food and medicines, which initially became scarce and expensive, have completely vanished from its markets. The ensuing political storm has also driven the Rajapaksa political dynasty out of power after about thirty years of rule.
Much like Sri Lanka, Pakistan’s political landscape has also been dominated by two major political families for the past forty-four years which enjoyed the covert backing of the security establishment. Operating from the shadows, the top generals alternated the Sharif and Bhutto-Zardari families in power, shaping a hybrid political order in which mutual interest, bargaining, influence peddling and division of spoils played a critical role.
However, there was an interregnum of nearly 10 years wherein this political order broke down after the fourth military intervention by Pervez Musharraf. The general appointed himself the “chief executive” of the country while trying to do fresh political engineering with the same material and institutional structure. Musharraf stumbled and failed, making it possible for the two dynasties to return to power by 2008 and force him to resign as president and leave the country.
The current tenure of the two political families and their traditional allies is their fourth stint in power since the second democratic transition that took place in 1988. The two major political dynasties in Pakistan, much like those in Sri Lanka and elsewhere, have raised themselves on massive fortunes made while they were in power. If there was any competition between them while they were fierce rivals and governed different provinces, it was in making material gains and cementing ties with electable political figures.
The two major political dynasties in Pakistan raised themselves on massive fortunes made while they were in power. If there was any competition between them while they governed different provinces, it was in making material gains and cementing ties with electable political figures
Rasul Bakhsh Rais
As the economic and political situation in the country remains fragile and unstable, one cannot rule out the same scenario developing in Pakistan in the coming weeks and months which we have witnessed in Sri Lanka. The similarities between the two countries go beyond the dynastic rule and include bad politics, incompetent and excessively corrupt leadership, personalized governance, eye-catching development projects, and questionable deals with the Independent Power Producers (IPPs) that have cumulatively pushed Pakistan to the current stage of deep economic crises with no easy solutions in sight.
Pakistan’s circular debt, a difference between what it owes to the IPPs and the sale of power to the public, has reached trillions of rupees in the last few years. It includes theft of electricity, line losses and the differential price between what it pays per unit and what it recovers. The energy trap woven by the two dynasties makes the electricity cost one of the highest in the world, making local industry uncompetitive with other developing economies. Worse, it is beyond any rationale to run power plants on imported coal that has to be hauled from the Karachi port to Tharparkar at a distance of about 600 kilometers where the country already has one of the largest coal reserves in the world.
According to the Economic Survey of Pakistan, the country has accumulated domestic public debt of Rs44 trillion and has external liabilities $96.8 billion, though some other sources claim the figures to be much higher. During the current financial year, Pakistan will spend 56 percent of its tax revenue on debt servicing and allocate about 28 percent of the budgetary expenses to repayment of loans. Going by the figures of the 2021-22 financial year, the country’s current account deficit stands at $30.1 billion. The hard earnings of foreign workers, mainly in Saudi Arabia and the UAE in the form of remittances of $22.9 billion, may not ease the situation since Pakistan will have to come up with $13.2 billion more to avoid default, according to official sources. It is mainly the current account deficit that keeps the foreign currency reserves at merely $15-17 billion, continues to drive the rupees down, and keeps the inflation high. It is just the tip of the structural economic problems of Pakistan which don’t lend themselves to any easy solution because of populism.
The elite corruption and low public trust in the dynastic politics are shaping a dangerous narrative of conspiracy, intervention and a mass movement by Imran Khan commanding street power. With political temperature on the rise, there is a real possibility of economic situation further deteriorating. In conditions of political unrest and confrontation, even the financial support from friendly countries and a deal with the IMF over the horizon may not save the situation. Perhaps some political reconciliation, a charter of economy and ‘neutrality’ of the big players in the game – which sounds like a tall order – can pull Pakistan out of the brink of a looming disaster.
- Rasul Bakhsh Rais is Professor of Political Science in the Department of Humanities and Social Sciences, LUMS, Lahore. His latest book is “Islam, Ethnicity and Power Politics: Constructing Pakistan’s National Identity” (Oxford University Press, 2017). Twitter: @RasulRais
