Just when everything seemed stable on the political front, in the last three weeks three key developments hinted at a brewing storm underlying this aura of political stability. First came the news of increased default risk on Pakistan’s debt, owing to large debt refinancing due with a sizable foreign debt component. Then, out of nowhere, came the statement by the Prime Minister (PM) criticizing the National Accountability Bureau (NAB) for its dealings in questioning bureaucrats and people close to the government. And then the MQM fired a warning shot, advising people to be prepared for a period of turmoil for the next 15 days.
Of the three, the MQM’s call is most surprising and unexpected. For the call was not aimed at Karachi only but for the masses across the country. It is not clear whether the call has to do with political maneuvering with some aim insight or whether the party has some tangible information regarding some significant turmoil ahead. But whatever the case may be, timing itself makes it worthy of consideration.
As for the PM’s cry on NAB’s activities, again timing is critical. For the last few months, NAB has been taking up investigations and cases that are linked to members of the ruling party. Particularly in Punjab the cases in question have links to key government ministers and some have even linked them to a prominent member of the ruling family. Interestingly, a few months back, when the PPP raised its voice against NAB and the Federal Investigation Agency’s (FIA’s) intrusion into the functioning of the Sindh government in the name of accountability, the ruling PML-N dismissed it arrogantly. Now, the PM is effectively making the same complaint that the PPP has been making since 2013 for Sindh and was seen making throughout during its last stint in power in Islamabad.
In all fairness, what the PM is saying has weight. For effective functioning of the government, officials and ministers taking key decisions should be free of harassment. At the same time, the principle of innocent until proven guilty remains paramount in the effective functioning of the state and justice system. But it is the PM himself and his ministers who have weakened the argument by advocating one Frankenstein or another in state machinery who crippled opponents from governing and kept them occupied. Now when the chickens have come home to roost, the PM seems jittery and panicked, and has decided to take the institution head on, and that too very publically.
However, the biggest sign of trouble for the government is the news of emerging default. Some may think that the default news has been leaked by the government itself to make a case for the privatisation of Pakistan International Airlines (PIA), an issue on which THE government is facing a lot of resistance from trade unions and opposition parties. But whatever the reason may be, the news is factually correct and the issue underlying, of debt refinancing, has serious ramifications for the government and the country.
I have been writing about the issue of imminent default for some time now. More importantly, default figures being mentioned in the news are related to direct government debt only. On top of that are the foreign exchange denominated payment commitments that are directly or indirectly through sovereign guarantee or guarantee of some of the key government departments or enterprises. The economic management of the Sharif regime has been focused on glittery short-term gimmicks while destroying the foundations of a stable, sustainable economy. Artificial lowering of the foreign exchange rate has damaged exports a great deal. Then, in the power sector, going for projects that are inefficient has been either financed fully by direct or indirect government financing or has been negotiated with foreign private or local entities in a non-transparent way, and has been ensured sovereign payments through one government department’s guarantee or another. This has put considerable drain on the foreign exchange and balance of payment, which has gotten covered by borrowing in international markets at exuberant interest rates. Because of this all, just when debt refinancing this year was going to be a major issue, the drag on the economy for years ahead is even bigger a cause of worry. This is Sharif’s third stint in power and, each time, he has left the country with the economy in shambles and foreign exchange reserves destroyed. This time, too, it seems we are reaching fast that point. In the case of Pakistan, for the last two decades, issues of debt refinancing or imminent default have usually been accompanied by regime change. If Mr Sharif does not succeed in managing the country’s debtors, particularly international, the economic ramifications will ensure a torrent of social and economic upheaval, which will make the government extremely vulnerable.
I do not know if the government is heading out or not. But one thing is for sure: the next few months are going to be of increased political and social turmoil. Mr Sharif, left on his own in auto-pilot mode, has a proven shelf life of a year or two. For lasting this long this time, he should thank his stars and the Pakistan Tehreek-e-Insaaf’s (PTI’s) dharna (sit-in).
The author can be reached on twitter at @aalimalik