Daily Times

Zahid Hussain, a Pakistani chemical importer, had a disastrous 2023 as his business almost imploded due to the country’s painful economic crisis compounded by simmering political turmoil.

However, the slight recovery that the cash-strapped nation has seen in the last few months, with the local currency gaining strength and a decreasing current account deficit, has restored his confidence.

Like many others, he is pinning his hopes on the general elections scheduled for Feb. 8. “Things have already started improving and I am quite hopeful that this will continue in 2024,” said Hussain, whose business came to a standstill following an unannounced ban on imports imposed due to depleting foreign reserves.

Hussain is one of many Pakistanis who reckon that things will improve on both the economic and political fronts after February’s national vote. “The economy is directly linked to political stability. Once an elected government is installed, there will be more time and focus on the economy,” he told Anadolu. But there are many who fear that the ongoing political and economic crises will continue, if not further deepen, even after the elections. “It totally depends on the transparency of the elections,” said Iqtidar Shameem, a real estate contractor based in the port city of Karachi. “If the elections results are controversial, it will trigger another political crisis and further deteriorate the already ailing economy.”

Political risks: Political turmoil has engulfed the South Asian nuclear power since the ouster of jailed ex-Prime Minister Imran Khan in April 2022, which sparked violent protests, followed by attacks on military installations after he was arrested in a corruption case last May.

Facing a deluge of cases, Khan, 71, is currently languishing in a jail near the capital Islamabad, but still maintains a strong base of die-hard supporters.

His Pakistan Tehreek-e-Insaf (PTI) party accuses the government and the Election Commission of Pakistan (ECP) of trying to sideline its candidates from the elections, aside from arresting thousands of its workers during a nationwide crackdown since May.

While the government and ECP deny the allegations, some analysts see the forthcoming vote as one of the most polarizing in the country’s checkered 75-year political history.

“The political challenge is huge, no doubt, mainly because of the polarization. I don’t see that reducing even after the general elections,” Amir Ilyas Rana, an Islamabad-based political analyst, told Anadolu.

However, he said there will likely be an improvement in the country’s overall situation, particularly in terms of the economy and external relations. According to Rana, three-time Prime Minister Nawaz Sharif, who is being seen as a favorite for a record fourth term, has a track record of development and putting the economy on track.

“He (Sharif) is relatively more acceptable than any other Pakistani politician in the outside world which will go in Pakistan’s favor in terms of economy and foreign relations,” he said.

Economic challenges: Pakistan, like many other nations around the globe, has been facing a biting economic crisis, along with a spiraling currency and skyrocketing prices of food staples, hurting household budgets in the country of over 240 million. The faltering economy pushed the country to the brink of default before it managed to revive a long-stalled $6 billion International Monetary Fund’s bailout package in June. The State Bank of Pakistan reported the first current account surplus for the ongoing fiscal year in November.

Despite low inflows and higher outflows for debt servicing, the current account was in surplus by $9 million in November, compared to a deficit of $157 million in the same month of 2022. Economists, however, reckon that Islamabad will continue to face economic challenges and risks in 2024 despite a slight recovery. “Pakistan’s economy is likely to face the same challenges during 2024 as most of the economic indicators set by the caretaker government have either deteriorated further or are below the targets,” said Shahid Hasan Siddiqui, a Karachi-based economist. He said the “average” economic performance of the caretaker government led by Prime Minister Anwaar-ul-Haq Kakar will leave a “huge bag” of challenges for the next government.

Although imports have reduced by about $5 billion, which brought down the trade deficit, there has also been a reduction in remittances and inflow of foreign funds, which will keep the economy under stress, he said. “Unless the government takes action against tax evaders, and comes up with and strictly implements structural reforms, the challenges will continue even after 2024,” said Siddiqui. He said inflation will remain high in 2024, although lower than 2023, while the rupee is also likely to depreciate against the US dollar.

Security threats: Pakistan has seen a surge in terrorist attacks, mostly in the northwest and southwest, since the Taliban returned to power in Afghanistan in 2021.

The rising insecurity has put a strain on otherwise good relations with the Taliban, as Islamabad accuses them of not taking action against militants allegedly operating from Afghanistan. Kabul denies the allegations.

“The ongoing (security) situation is likely to persist for the initial months of the year, at least until the general elections,” said Mahmood Shah, a retired brigadier and defense analyst. Speaking to Anadolu, Shah said things will likely improve because of the two-pronged national security policy that Pakistan is now pursuing.

“The government has exerted diplomatic and economic pressure on Afghanistan on the one hand, while on the other, security forces continue to crackdown the militant groups inside the country,” he said. “This combination is likely to improve law and order in the country.” According to Shah, the expulsion of nearly 500,000 undocumented Afghan refugees has put pressure on Kabul. Last year, Pakistan saw the highest number of suicide attacks since 2014, nearly half of them targeting security forces. The Pakistan Institute for Conflict and Security Studies (PICSS) said “29 suicide attacks were reported, resulting in the tragic loss of 329 lives and leaving 582 individuals injured.” As many as 48% of deaths and 58% of injuries were security forces personnel, according to PICSS data. “This marks the highest death toll since 2013, when 683 people lost their lives in 47 suicide bombings,” the institute said.