Pakistan’s Economic Blindspot

Title: Pakistan’s Economic Blindspot.

 Introduction: On July 12, the International Monetary Fund (IMF) approved a bailout package worth $3 billion for Pakistan. The first half of this year brimmed over with apprehensions, and predictions of Pakistan defaulting on its debt. While the IMF deal has ensured that Pakistan avoids default, at least for the time being, it unleashed a familiar vicious cycle, one that has been repeated a couple of dozen times throughout the country’s history. 

Parties disconnection:

This time around, however, the magnitude of the political variables engulfing the oft-regurgitated fiscal cycle is in stark contrast to what has transpired in the recent past. The usual five-year circle begins with a newly elected government agreeing to an IMF plan, completing it in the first three years, and then derailing it with populist measures in the lead-up to the next election. The latest IMF program, instead, will be implemented by possibly three different regimes across a period of nine months.

The current regime spearheaded by the Pakistan Democratic Movement (PDM) alliance, led by the Pakistan Muslim League-Nawaz (PML-N), which has agreed on the IMF deal, will soon make way for a caretaker setup that will supervise the upcoming general elections that will take place sometime toward the end of 2023. The IMF negotiations this year overlapped with an electoral limbo in Pakistan as the state dillydallied over scheduled polls until a military-led crackdown against the Pakistan Tehreek-e-Insaf (PTI), the overwhelming favorite, reassured the ruling coalition of the army’s customary political engineering. It will be that engineered government that will see the current bailout through and, inevitably, negotiate a longer-term follow-up IMF plan.

Diplomat Brief Weekly Newsletter

Get briefed on the story of the week, and developing stories to watch across the Asia-Pacific.

Get the Newsletter:

Clearly, the incumbent government isn’t even bothering with a pretense of electoral freedom and fairness, and is pushing for a caretaker setup that is an extension of the current regime, with Finance Minister Ishaq Dar’s name being floated this week as the potential caretaker prime minister. The fact that Pakistan even needs a caretaker setup to transition between governments is a reaffirmation of the distrust surrounding all governance matters, hampered by the weakening of all institutions – barring, of course, the omnipotent military. That no number of IMF packages or foreign bailouts will suffice in keeping the economy afloat without the country undergoing a multifaceted structural revamp, remains Pakistan’s fiscal blindspot.