July 26, 2018
The apparent victory of cricketer-turned-politician Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party in the July 25 parliamentary election marks a new inflection point in Pakistan’s politics and external policies.  This election, though marred by allegations of tampering and violence, marks Pakistan’s second consecutive transition from one civilian-led government to another through an election.  Additionally, PTI’s ascent is a break from the dominance of Pakistan’s two, dynastically controlled, political parties, the Pakistan Peoples Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N).  As negotiations to form a government under PTI leadership take place over the coming weeks, observers should watch a few factors for signs of what is to come.

Military’s role:  This election was marred by widespread allegations against Pakistan’s army and its Inter-Services Intelligence (ISI) agency of tampering and intimidation, underscored by the arrest and incarceration of former Prime Minister Nawaz Sharif on corruption charges.  Opposition leaders were quick to denounce the election results as illegitimate.

If the allegations are true, the apparent breadth and brazenness of military meddling in the election is both audacious and concerning. But it also continues a trend. Over the almost ten years since the military’s most recent period of direct rule, persistent tensions between the governments led by the PPP (2008-2013) and the PML-N  (2013-2018) and the military highlight the Pakistani army’s influence over civilian institutions.  Where military will exists, military rule persists.

Extremism: The electoral process was marred by violence.  A suicide bombing on election day near Quetta killed at least thirty people.  Three significant regional candidates were assassinated, and others were targeted by attacks.  This came as a string of extremist candidates ran for office and leaders in each of the major parties accepted local endorsements from militant-oriented ulema groups.

These reflections of the darkest corners of Pakistan’s society (and security establishment) reveal once again the dilemma faced by the new government of whether and how to exit from Pakistan’s longstanding strategic association of militant proxies.  The early test will be whether the new government can be formed without the participation of extremist-associated candidates, but the more important indication will come from the government’s deeds. 

Economy:  Despite being one of the twenty fastest-growing economies in the world last year according to the World Economic Forum, the new government will inherit a balance of payments crisis. For the third consecutive time in Pakistan, a spendthrift government has left its successor to manage the crisis. As per the most recent data released by the State Bank of Pakistan, Pakistan’s foreign exchange reserve will provide only 1.7 months of import coverage, which is far below the three months recommended by the International Monetary Fund (IMF). 

The roots of Pakistan’s economic crisis are deep, stemming from serial irresponsible fiscal decisions, persistent overvaluation of the rupee, growing trade deficits caused in part by Pakistan’s dependence on fuel imports amid global price fluctuations, and a narrow tax base.  In a country with over 100 million registered voters, and having just witnessed an election with over 50 percent turnout, it continues to be astonishing that only around 1.8 million people pay income tax in Pakistan. To make up for revenue shortfalls, successive governments target foreign businesses with extra fees and duties, driving away much-needed foreign direct investment and suppressing growth prospects.

The recently departed PML-N government compounded these root symptoms by taking on increased external debt, first by reentering international bond markets for the first time and later by entering into borrowing arrangements with Chinese banks to bridge reserves.  The issue is twofold—the new government will have to either repay or reschedule large debt payments to the Industrial and Commercial Bank of China Limited (ICBC) for short-term balance of payments support and negotiate a new IMF program.  Returning to the discipline and austerity required by the IMF for an astounding twentieth time in thirty-five years will be deeply unpopular in Pakistan, but a responsible government should welcome the help in unwinding the endemic drivers of Pakistan’s constant economic crisis.  Alleged alternatives, such as bailouts from China or Saudi Arabia, seem highly unlikely to manifest.  An early return to the IMF, along with simultaneous signals in the form of Chinese debt rescheduling, could return Pakistan to a steady growth trajectory relatively quickly, particularly if accompanied by reforms to improve the business climate and promote exports.

Foreign policy:  PTI’s Khan stated in his July 26 victory address that “no other country needs peace like we do.”  The problem sheet is long:

India-Pakistan:  Khan inherits tensions with India that have spiraled, just as Indian Prime Minister Narendra Modi begins his own campaign for re-election.  Khan’s victory remarks that he is wrongly portrayed as a “Bollywood villain” in the Indian press indicates he is aware of the reputational problem his past public remarks has created. But Indian concerns run far deeper, stemming from Pakistan’s persistent use of militant proxies across the border.  India is the policy area over which Pakistani army control is strongest, but it is also the economic relationship with the greatest potential. If Khan can succeed where his predecessors failed in corralling the proxy groups and preventing cross-border incidents, the upside is substantial. In the short term, an effort to reduce tension and cross-border violence is important.  Sharif, by many counts, ran a campaign in 2013 on the basis of normalization of ties with India, and was chastened by the army in part for those efforts.  After the Indian election in 2019, the time could be right for another attempt toward normalization, or at least a new détente. 

US-Pakistan:  US-Pakistan relations remain frigid due to concerns about Pakistan’s support for militancy and terrorism and concerns about Pakistan’s nuclear weapons program.  After a new year’s missive by US President Donald J. Trump that the United States has gained nothing but “lies and deceit” from Pakistan since 2002, previously held security assistance to Pakistan was cut.  There is risk here for the new government:  on the one hand, Khan’s brash and confident style could lend itself to Trump-style, grand bargain diplomacy; on the other hand, if Khan were to make overtures on the core grievances, he would surely face the venom of Pakistan’s army.  A real change in tone of US-Pakistan relations is unlikely, absent progress on nukes and proxies.

Afghanistan-Pakistan:  Khan’s personal history of calling for concessionary talks with both the Pakistani Taliban and the Afghan Taliban have led to allegations that he is sympathetic to the movement’s objectives.  His government will arrive at another moment of cautious optimism about the Afghan peace process, following an Eid ceasefire in June and reports of renewed US-Taliban direct talks.  Past Pakistani governments have faced similar dilemmas, and decided willingly or not to yield policy to the army or to focus on narrow, self-interested understandings that aim to reduce violence inside Pakistan while allowing the Afghan war to continue to be fought from Pakistani territory.  Afghan President Ashraf Ghani faces re-election next year, and Kabul politics already seems consumed by pre-election jockeying and intrigue.  The new Pakistani government could be a constructive force for peace in Afghanistan if it can successfully partner with the army, work with the United States and Kabul, and draw on support from other regional actors like China, Saudi Arabia, and the United Arab Emirates. 

China-Pakistan:  China’s expanding economic footprint in Pakistan, by virtue of the China-Pakistan Economic Corridor (CPEC), seems unlikely to shift.  But China’s past relations with Pakistan have been built on relationships with “known knowns”—leaders with whom China has confidence built from experience.  Khan is not a “known known.”  The disruptive protests that he led in 2014 closed Pakistan’s capital, Islamabad, and forced the embarrassing postponement of Chinese President Xi Jinping’s landmark visit to Pakistan to unveil CPEC for almost a year.  But Khan has met Xi before, and one could argue that China has too much to lose in Pakistan.  Several challenges to Pakistan-China relations exist. 

Most urgently, Pakistan will need relief from debt obligations to Chinese banks; this seems very likely to be an early confidence-building signal from Beijing.  Second, the new Pakistani government will want to put its stamp onto CPEC.  If past announcements on CPEC by Chinese officials hold, the new government will be challenged to manage a new phase where the focus shifts toward industrial and commercial development rather than the flashy, easy-to-brand, and high-profile infrastructure that characterized the PML-N years.  This switch could contribute to an overall economic plan more focused on social welfare and job creation, but the lack of signature projects could rankle a new government looking to prove itself.  Third, the prosecution of alleged corruption by previous government officials for CPEC-related agreements could spur tension with Beijing.

As an opposition figure scrambling to gain purchase within Pakistan, Khan made a practice of attention-seeking declarations against the United States, India, and others, and sometimes made statements which seemed favorable toward militant groups.  He is alleged by opponents to be the army’s darling.  We will see whether the Imran Khan who ascends to the prime minister’s office is capable of being a responsible, modern, moderate statesman, as his supporters hope, or a rabble rousing populist, as his opponents allege.

James Schwemlein is a consultant with the Atlantic Council’s South Asia Center and a former US diplomat. Follow him on Twitter @JamesSchwemlein.

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