Pakistan’s domestic politico-judicial crisis has seemingly reached a point of no return. The apex court wants to keep the democratic spirit of the Constitution alive, but differences between the top judges continue to add to political uncertainty. The Election Commission, too, is apparently not independent.

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Simultaneously, terrorism and militancy continue to grow in Balochistan and Khyber Pakhtunkhwa, creating tougher challenges for the army and law enforcement agencies and placing an additional burden on scarce financial resources. Religious extremism and scant respect for the rule of law are evident across Pakistan, including in Sindh and Punjab — the home provinces of PML-N and PPP, the two main political parties that make up the current hybrid regime.

Meanwhile, the spread of Israeli war from Ghaza into Lebanon and rejection of ceasefire calls by Prime Minister Netanyahu may potentially lead to a wider military engagement across the Middle East with more serious repercussions for debt-trapped Pakistan with squeezing space for geopolitical shifts.

When seen against this domestic and external context, the ongoing tussle between the current hybrid regime and the apex Court and the eroding independence of the Election Commission is extremely worrying.

Fostering a culture of political tolerance can help Pakistan make the best of the IMF bailout

The top leadership of PTI is in no mood to talk to the current political leaders or their powerful backers in the military establishment. The party has, instead, decided to increase political pressure on the current regime taking advantage of the public anger growing day by day with ongoing energy crises, additional tax burdens and lack of job opportunities.

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Economic indicators, particularly those of the external economy, are expected to improve with the International Monetary Fund’s (IMF) recent decision to extend the $7 billion loan to the country. The rollover of funds placed by China, Saudi Arabia and the United Arab Emirates and the release of the first tranche of the IMF loan will keep the pressure off the exchange rate and the forex reserves.

However, this would be a likely scenario for a very short period. The IMF has linked the disbursement of the second and subsequent tranches to a set of new conditions, and some of them are too tough to implement. For example, the Fund wants Pakistan to fully tax agriculture, real estate and retail sectors and it also wants financial pacts to be reached between the federal and provincial governments regarding revenue sharing.

Besides, the Fund now wants a cut in the size of the federal government and intends to keep a direct eye on the expenses of the provincial governments. It has also shown displeasure over the Punjab’s temporary energy pricing relief and doesn’t want its repetition by any other province in the future. It wants total subsidy on energy price relief not to exceed 1pc of Pakistan’s GDP.

Whether Pakistan can ensure compliance on such politically sensitive and potentially explosive issues depends on how soon the country’s ruling class shuns short-sightedness and parochialistic approaches and the country’s entire political class and the establishment work in harmony for economic progress, within their separate areas of responsibilities.

As long as the governance system remains opaque, with the role of the establishment overlapping with the political government, and as long as the political class does not become more mature, implementation of the IMF programme will continue to produce new controversies and reignite the old ones and handling of economic issues smoothly and single-mindedly would remain elusive.

If that happens, Pakistan will hardly be able to get out of the current debt trap during the tenure of the IMF loan and will need another one after its completion. Prime Minister Shehbaz Sharif has said his government wants to make this IMF loan the last one. How difficult it could be to match his expressed desire with the required actions is anybody’s guess.

However, upholding the Constitution in its letter and spirit and accepting the verdict of the apex court, even if it means short-term political loss for those in power, giving the opposition its due share in the Parliament and fostering a culture of political tolerance can help Pakistan make the best of the IMF bailout programme.

Their failure to do this and the failure of major constitutional bodies to work smoothly in their constitutionally defined areas independently and without fear would only create more chaos and damage the economy.

Published in Dawn, The Business and Finance Weekly, September 30th, 2024