Pakistan’s Narrowing Options in Extracting Geopolitical Rent

TCA Raghavan - Former Indian High Commissioner to Pakistan and Singapore

Pakistan’s economic predicament suddenly has become more evident to an audience wider than simply economists or policy analysts. Its Rupee devalued in the space of 24 hours by about 10 percent over 24th-25th January. Alongside, the power grid crashed with acute power shortages and blackouts over large parts of the country. Both these disruptions animated economic dysfunctionality amidst other political and regulatory failures, underlining how real Pakistan’s economic and political crisis is to its citizens.

 "Pakistan’s external environment today is certainly different. It finds itself marginal to and isolated from the principal themes that dominate international politics."

These domestic dislocations occur amidst an uncertain geo political environment with troubled and friction ridden interfaces with Afghanistan, India and even Iran. Pakistan’s traditional allies and donors, in particular China, Saudi Arabia and other Gulf States-- while optically supportive as always, have been slow to step in given the uncertain politics prevailing and in the absence of a clear plan of how Pakistan intends to manage this latest financial crisis. The United States, an important donor during the 1980s and in the 2000s, has been similarly slow to step in, largely because there is no pressing reason for it to do so now. On the whole this reticence on the external front gives an added significance to Pakistan’s ongoing dance with the IMF to somehow bring a funding program in abeyance for the past few months,  back on track. An IMF programme back in place will inspire confidence in other donors—or that is the expectation.

All this presages how turbulent a year 2023 is going to be--perhaps yet another annus horribilis. An IMF programme, regardless of its medium-term stabilization potential, means further devaluation, even higher inflation, financial stringency etc. All of this points to trouble in a deeply – perhaps irrevocably-- divided polity as Imran Khan battles it out with Nawaz Sharif and Asaf Ali Zardari; each bout in this contest reveals the raw intensity of the political combat now raging.

If 2023 promises to be another difficult year, 2022 was no less. That year in fact provided a snapshot of Pakistan’s history as multiple crises intersected - political conflict, intense civil military tensions, an economic free fall amidst devastating floods and rising terrorist attacks. This cocktail to be complete needed another, not unfamiliar, ingredient and this came in the form of an unanticipated degrees of tension and instability in its relationship with the Government in Afghanistan despite it being headed by the Taliban.

To those even sketchily familiar with even the bare bones of Pakistan’s recent history, will find that none of this is particularly new and each of these crisis points is a recurrence of past patterns. But perhaps there is something different in these different arcs of crisis maturing and intersecting together. What also may be different is the regional and global environment. Devastated by a crippling pandemic and in the midst of the most acute geopolitical crisis in at least the past quarter century in the form of a war in Europe, Pakistan’s external environment today is certainly different. It finds itself marginal to and isolated from the principal themes that dominate international politics. Leveraging its geopolitics for economic gains has become that much more difficult and challenging and this in itself is a relatively novel situation for Pakistan’s policy makers.

"Leveraging geopolitics is becoming more and more of a difficult option for Pakistan’s strategic elite."

We get a sense of this predicament from the handling of the IMF by the government of Pakistan in the past months. The IMF programme would have stabilized the economy and opened a channel for other funding arrangements to fall into place. It would have certainly meant a great deal of domestic pain in terms of devaluation, inflation, financial stringency etc-- all deeply unpalatable given the daily political battles rocking Pakistan. The view that emerged was that it would be possible to “stare down” the IMF and get better terms that would ease the pain to some extent. This strategy was underwritten by the assessment that Pakistan was geo politically too important for the IMF not to play ball.

In fact, the IMF did just that; it refused to proceed further unless Pakistan took the difficult decisions needed to bring back some economic sense in its policy. For 3-4 months a dangerous drift had, however, prevailed, a situation which is generally being blamed on the current Finance Minister Mohammad Ishaq Dar. There is, however, a wider mindset that sustains such views and it has been nurtured for a long period of time by seeing the possibilities of leveraging geo politics for economic ends. The current situation has, in brief, demonstrated how that older approach now faces numerous limitations.

The terrorist attack of 30th January on a mosque in Peshawar with over a hundred fatal casualties forms part of the pattern of a growing intensity of TTP attacks after November 2022 when it called off the year long  ceasefire that had seen renewed efforts made by the Pakistan Army to reach some a kind of an agreement. The not unnatural expectation in Pakistan had been that with the triumph of the Taliban in Kabul in August 2021, a suitable environment now existed to settle the TTP question. It is well known that things have in fact not progressed in that direction. Pakistan therefore, struggles to reconcile the contradiction between a strategic victory represented by the Taliban comeback in Afghanistan with the blow back impact of this within its own territory.

The intensity of the latest attack brings out that alongside a full-fledged economic crisis and a deeply polarizing political crisis, Pakistan may also now have entered the zone of a national security crisis. The recurrence of such multiple crises or the fact they overlap to such a great extent is not new in itself. However, the TTP crisis and the downturn in relations with the Taliban in Afghanistan, both also point to the phenomenon of the narrowing of Pakistan’s options and equally the erosion in its capacity to address the issues concerned. In brief, leveraging geo politics is becoming more and more of a difficult option for Pakistan’s strategic elite. Whether and how a traditional rentier state can transform itself into something different is the question that poses itself to Pakistan and the jury is definitely out on whether this question will be addressed at all, leave alone answered.

(Exclusive to NatStrat)