Year of Living on the Limit – Journal

TRENDS for the current year do not point to an optimistic outlook for Pakistan’s politics and economy in 2022, with general elections only taking place a year from now. The political temperature will rise exponentially and the environment will also be more charged with reinforcing prevailing trends. The year 2021 has seen greater polarization and a divisive politics in the country, with increasing tensions between the government and the opposition and extremist forces calling the shots in confrontations with the authorities.

The economic challenge has intensified. Inflation has skyrocketed and shortages of essential goods and services have increased, especially gas supplies. Funding gaps have widened in the government budget and the country’s trade account. The delay in an IMF program eroded business confidence and weakened stock market sentiment. This grim scenario has translated into rising public discontent and concerns about the future. A consumer confidence survey by IPSOS, a Paris-based research company, found that 87% of people believed the country was heading in the wrong direction at the end of 2021.

Read more: Most Pakistanis think the country is headed in the wrong direction (Ipsos survey)

Perhaps the most uninspiring aspect of the 2021 confrontation raging between government and opposition has been how it has produced a political discourse in which invective and inflammatory rhetoric has overshadowed any meaningful discussion of the political issues. Political leaders have spent more time vilifying their opponents than expressing their position and how to tackle the country’s challenges. Those in power seemed to equate government performance with demonizing rivals while opposition leaders returned the compliment using similar tactics. The tone and content of political discourse have plunged into new depths of incivility. Bitter controversies and superficial and provocative stories put an end to all reasoned debate. This has sparked public contempt for both sides and degraded the country’s democracy.

Read more: Growing Tension in Center-Sindh Relations Indicates a Wider Problem

While the role of parliament is seen as an important indicator of the health of democracy, it has not inspired much confidence either. Parliament has been mainly reduced to a buffer by the ruling party with the opposition unable to mount any significant resistance. The most astonishing demonstration occurred last month when more than 30 bills were passed, including an election amendment to allow electronic voting machines, without debate and in just hours. This set a new record for legislating without consensus.

Trends for the outgoing year do not indicate an optimistic outlook for Pakistan’s politics and economy in 2022.

The hybrid political system continued to reign with occasional indications of civil-military disagreements. The most important concerned the appointment of the head of the first Pakistani intelligence agency. However, it was the overall impact of this arrangement on the regime that had important implications for both democracy and the reputation of the military. Because the government has repeatedly relied on the establishment to concoct majorities for parliamentary votes and maintain its coalition, it has prevented it from learning the political skills of managing the legislature, building a ‘consensus and acceptance of other points of view. This and other forms of behind-the-scenes political activism by the military have weakened its claim for neutrality and undermined its traditional role as arbiter.

The opposition has appeared without leadership and in disarray for much of the past year. Formed as an alliance of 11 parties, the PDM weakened with the exit of the PPP and the ANP. He never recovered and his subsequent activities, despite their noise and fury, posed little challenge to the government. The two main opposition parties have also offered few solutions to the country’s problems. The largest party, the PML-N, has not been able to reconcile the “internal divide” between two divergent approaches and narratives and decide whether it wishes to pursue a confrontational or conciliatory approach towards the military establishment. He must resolve this dilemma well in advance of the election.

For the ruling party, the Punjab has remained its Achilles heel, with a weak and lackluster provincial leadership unable to ensure effective administration. Its mismanagement produced internal party dissensions and contributed significantly to the PTI’s loss of political ground in the province – the decisive battleground in the general elections.

The general lack of governance at the center also contributed to the political setbacks faced by the ruling party in by-elections. He continued to fend for himself and rule unilaterally without clear direction. Morals courses rather than focusing on political priorities seemed to preoccupy its leaders more and more. However, two government initiatives that were widely appreciated were the expansion of the Ehsaas program and the introduction of the Punjab and KP health card. Aimed at helping the most disadvantaged, these programs bring credit to the government.

The biggest and most consequential issue that dominated 2021 was the deteriorating state of the economy despite a modest recovery following government stimulus measures linked to Covid. Political uncertainty and impending elections have complicated the economic situation, discouraging domestic and foreign investment. The delay in resuming the IMF program has depleted foreign exchange reserves, put pressure on the rupee and eroded market confidence. Inflation has become a politically explosive problem, increasing dramatically for a combination of reasons, including on the supply side and monetary factors, while unlimited subsidy programs have also contributed.

High inflation is expected to persist, undermining the benefits of the 4% growth forecast for the coming year. The global dislocation of supply chains will also exacerbate economic difficulties. All this will have a political cost for a government that enters the elections. The same will apply to the prior actions that it is obliged to take – although necessary – such as increasing electricity tariffs, to access IMF money.

The past year has also seen an increase in public debt, both internal and external, with public debt reaching over 90% of GDP. Electricity sector debt has also grown exponentially, exacerbating the circular debt problem which still awaits meaningful resolution. The fragile macroeconomic situation will continue to be difficult in 2022 with the persistence of negative trends, including a high budget deficit, low foreign exchange reserves (due to debt service requirements), a growing current account deficit and stagnant private investment. The use of bank credit to finance the public sector will continue to crowd out private investment with adverse effects on the economy.

Once the IMF program resumes in the coming year, it will ease the country’s balance of payments difficulties. But more structural reforms will be needed to unlock funds from other multilateral and bilateral donors. Fiscal vulnerabilities will remain and will need to be managed with caution, as will internal and external risks to the economy in 2022. However, it will be the government’s ability to lower inflation that will be the decisive economic factor in determining its political fortunes in the future. approaching elections.

The writer is a former ambassador to the United States, the United Kingdom and the UN.

Posted in Dawn, December 20, 2021

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