Pakistan’s caretaker government faces daunting challenges on economic, security, political fronts— analysts

Commuters ride past a truck painted with a portrait of Pakistan's Army Chief General Syed Asim Munir, in Islamabad, Pakistan, on August 16, 2023. (Photo courtesy: AFP)
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Updated 17 August 2023
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Pakistan’s caretaker government faces daunting challenges on economic, security, political fronts— analysts

  • Caretaker governments are empowered to run day-to-day affairs of the government, ensure conducive environment for polls
  • Experts say caretaker setup must show competence to implement IMF program, handle political, security crises before polls 

ISLAMABAD: Pakistan’s caretaker government faces daunting challenges in maintaining law and order, neutrality, and ensuring economic stability before the country heads to the polls, political analysts said on Wednesday. 

Since Caretaker Prime Minister Anwaar-ul-Haq Kakar took an oath of office on August 14, Pakistan’s government has jacked up petrol prices by Rs20 per liter, raising fears of further inflation while the Pakistani rupee has depreciated against the greenback by over six rupees. 

Kakar takes over the country’s reins at a time when militants have stepped up attacks in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province as the South Asian country grapples with an economic crisis amid deepening political instability, with popular opposition politician Imran Khan behind bars on graft charges. 

Dr. Khaqan Hassan Najeeb, a former economic adviser to the government, said the caretaker administration would have to work on four “key areas” which include implementing the International Monetary Fund’s (IMF) program, multilateral agreements, privatization of state-owned entities, and intergovernmental transactions. 

“Pakistan’s new caretaker setup must show the ability, the competence, and [select] the set of people who can carry the IMF program,” Najeeb told Arab News. 




Pakistan's caretaker Prime Minister Anwaar-ul-Haq Kakar takes oath from Pakistan's President Arif Alvi, in Islamabad, Pakistan August, on 14, 2023. (Photo courtesy: REUTERS via PID)

In July, Pakistan secured a last-gasp $3 billion IMF bailout package that helped it narrowly escape a sovereign default. The benchmarks and quantitative performance criteria agreed with the IMF must be met so that the November review goes through, Najeeb said. 

He said Pakistan would also have to work on handling its energy crisis to ensure its circular debt “doesn’t rise further.”

Gharidah Farooqi, a prominent TV host and political analyst, said the biggest challenge for the caretaker prime minister would be to establish his “neutrality” as the general impression was that he was close to Pakistan’s powerful military. 

“It is a big challenge for him to move forward positively with that impression and how he maintains his neutrality instead of becoming a pawn prime minister,” she told Arab News. 

Farooqi said another challenge for the caretaker government would be to take decisions with every political entity on board, especially Khan’s Pakistan Tehreek-e-Insaf (PTI) party. “How long the caretaker setup extends [its tenure] and consequentially how much elections are delayed, this would be a big challenge for him,” she said. 

She said though it was the Election Commission of Pakistan’s (ECP) responsibility to hold polls, all eyes were on the caretaker government to see whether polls would be held within a constitutional timeframe or on a date decided by consensus among all political parties. 

“To maintain neutrality on transfer and postings, releasing funds will be a challenge for him to fix the economy, and provide relief to the public during his tenure,” Farooqi said. 

Journalist and security analyst Hassan Khan said the security situation in KP and Pakistan’s southwestern Balochistan province was “deteriorating with every passing day” adding that the caretaker government would not be able to handle it. 

“The caretaker government would not have the required capacity and decision-making space to handle the issue of terrorism in both provinces,” Khan told Arab News, adding that security forces were routinely being targeted in Pakistan’s northwestern cities of Peshawar, Bannu, Dera Ismail Khan, Orakzai, Kurram, Khyber, Swat, and Bajaur districts.

He said the state’s action was “largely limited” to issuing condemnations. 

“Tehreek-e-Taliban Pakistan and Daesh were quite active in all these regions and involved in target killings of politicians and religious leaders,” Khan said. “But the state was trying to externalize this issue by blaming it on Afghanistan.” 

He said it would be challenging for the government to maintain a conducive environment for polls in KP and Balochistan. 

“Some forces might use the recent wave of terrorism in these two provinces to postpone the elections in these regions,” Khan said. 

“If the government and election commission go ahead with elections in these provinces, political parties and candidates may not be able to hold public gatherings and corner meetings to mobilize voters,” he added. 


Pakistan stocks plunge 9 percent, trading halted as Middle East tensions rattle markets

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Pakistan stocks plunge 9 percent, trading halted as Middle East tensions rattle markets

  • Benchmark index triggers automatic halt minutes after opening
  • Rising oil prices raise concerns over inflation, import bill and currency pressure

ISLAMABAD: Pakistan’s stock market fell nearly 9 percent within the first few minutes of trading on Monday, triggering an automatic one-hour halt under risk management rules, following intensifying hostilities in the Middle East.

Trading on the Pakistan Stock Exchange (PSX) was temporarily suspended after the sharp early selloff, reflecting panic across regional markets. The market reaction came after the United States and Israel conducted strikes in Iran over the weekend that killed Supreme Leader Ayatollah Ali Khamenei and other senior officials. Iran retaliated by bombing US bases in Gulf states and direct attacks on Israel. Concerns over potential disruption to energy supplies, particularly through the Strait of Hormuz l, which handles roughly one-fifth of global oil shipments, pushed crude prices sharply higher.

Although Pakistan, which borders Iran, is not directly involved in the conflict, the country remains vulnerable to external shocks due to its heavy reliance on imported energy and remittances from the Gulf region, analysts said.

“Due to the evolving nature of the conflict and involvement of various countries, the volatility may continue till the resolution or de-escalation of this conflict,” Topline Securities said in a note to clients.

The brokerage said Pakistan’s benchmark index has already fallen about 19 percent from its January high of 189,000 points and warned that further instability could weigh on investor sentiment.

Oil prices rose 6–7 percent in the latest session and are up about 15 percent over the past seven trading sessions amid mounting regional uncertainty, according to the brokerage note.

Pakistan imports an estimated $15–16 billion worth of petroleum products annually, including crude oil, refined fuel, LNG and LPG. Every 10 percent increase in oil prices could raise the country’s import bill by approximately $1.5–1.6 billion, Topline said. Other imports linked to energy prices include edible oil, coal and rubber-based products.

Higher oil prices could also feed into inflation. 

“Every 10 percent increase in crude oil prices may elevate inflation estimates by 40–50 basis points,” the brokerage said, noting both direct fuel price impacts and secondary effects across supply chains.

Analysts also flagged potential currency pressure, as rising import costs and concerns over Middle East instability, a region that accounts for more than half of Pakistan’s remittance inflows, could weigh on the rupee.

However, Topline said Pakistan’s foreign exchange reserves remain at relatively comfortable levels due to recent credit rating improvements and proactive central bank interventions.

With Monday’s decline, the market is now trading below 6.5 times projected 2027 earnings, compared with a historical average of 6.9 times, the brokerage added.

The conflict’s trajectory remains uncertain, and investors are closely watching developments in the Gulf, particularly around energy routes and further retaliatory actions.