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Pakistan’s fragile new government looks to the Gulf

Pakistan
(Photo: Shutterstock)
There is a new coalition government in power in Islamabad. And, like its predecessors, it not only inherits an economy in crisis, but is also engaging the International Monetary Fund (IMF), as well as key foreign partners – including Saudi Arabia and the UAE – for emergency support. اضافة اعلان

The past, unfortunately, has a tendency to repeat itself in Pakistan. Its elite power struggles and economic breakdowns not only recur, they tend to do so simultaneously. Amid Pakistan’s never-ending game of political musical chairs, its rulers have gone to the IMF nearly two dozen times and, over the decades, Abu Dhabi and Riyadh have stepped in on numerous occasions to avert a total meltdown of the Pakistani economy.

So Gulf Arab rulers will be unsurprised as the new prime minister, Shehbaz Sharif, makes his way to the region in the coming weeks with outstretched hands. Shehbaz’s brother, Nawaz – a former three-time prime minister – made this journey several times before.

Abu Dhabi and Riyadh are already providing billions in short-term financing to bolster Islamabad’s foreign exchange reserves. But with inflation in the double digits and the current account and fiscal deficits heading toward dangerous levels, Pakistan desperately needs to shore up its foreign exchange reserves, which now barely cover two months of imports, as well as manage the rising cost of fuel.

The Sharif government recently decided not to reverse costly energy subsidies announced by the previous government, which may not only put its current IMF program in jeopardy, but will also force cuts in development spending.
Shehbaz, like his predecessor, may also seek to draw Gulf Arab states into projects associated with the Gwadar port and the China-Pakistan Economic Corridor. But regional states are likely to defer decisions on major investments until after the next general elections. The coalition government’s longevity is uncertain and, in any event, short. It could last for as little as three months or well into next year, when the current National Assembly’s term is set to end.
Pakistani commentators aligned with the new government claim that Shehbaz will return from Saudi Arabia with “good news”. That could mean an additional deposit with Pakistan’s central bank to stave off a balance of payments crisis and an expansion of the existing oil credit facility provided by Riyadh.

Shehbaz, like his predecessor, may also seek to draw Gulf Arab states into projects associated with the Gwadar port and the China-Pakistan Economic Corridor. But regional states are likely to defer decisions on major investments until after the next general elections. The coalition government’s longevity is uncertain and, in any event, short. It could last for as little as three months or well into next year, when the current National Assembly’s term is set to end.

Shehbaz’s visit to Riyadh may end up simply focusing on mending relations with Crown Prince Mohammed bin Salman. The Sharif family has long-standing ties to Saudi Arabia. It spent the early-mid 2000s in exile in Jeddah after Nawaz was deposed by then-army chief General Pervez Musharraf. The Sharifs also had investments in Saudi Arabia. But Nawaz’s refusal in 2015 to join the Saudi-led coalition in the Yemen war angered Riyadh and marked a rupture in Sharif-Saudi relations.

Around the same time, Nawaz’s government built ties with Qatar and Turkey, marking a shift from its Saudi-centric approach toward the Middle East. Additional aid from Riyadh might require the Sharifs to offer something in return, such as a tougher posture on Iran.

Shehbaz is unlikely to continue the Islamic populism of his predecessor, Imran Khan – and this could earn him goodwill with both Abu Dhabi and Riyadh. Khan was not only a staunch critic of India’s human rights abuses in the disputed region of Kashmir, he was also outspoken against the Hindutva ideology of India’s ruling Bharatiya Janata Party. Both Shehbaz and the Pakistani army, seek a more pragmatic approach with New Delhi with greater priority toward trade. And this approach, while having political costs at home, could reduce friction with Abu Dhabi and Riyadh, which are drawing closer to India.

Khan’s international Islamic populism was a focal part of his relations with Turkey, which rankled both Saudi Arabia and the UAE. Shehbaz will pursue strong relations with Ankara – his ties to the country date back to his tenure as chief minister of the Punjab province – but these efforts will be largely driven by economic cooperation.

Pakistan will see rising political instability in the coming months as Khan’s protests continue and economic conditions deteriorate. Amid the political chaos, one can expect Pakistan’s military-to-military ties with partners in the Middle East to grow. The pace of joint military exercises between Saudi Arabia and Pakistan seems to have accelerated in the past year. And Turkey is a growing source of defense hardware for the Pakistani military. Strategic cooperation between Pakistan and its Middle East partners will be more or less insulated from the political tumult in Islamabad.

An extraordinary bailout package from Pakistan’s Gulf Arab partners could provide the new government the lifeline it needs to stay in power into next year and propel Shehbaz to victory in the next general elections. But having achieved its primary goal of dislodging Khan from the office of prime minister and preventing him from appointing his preferred senior officer as army chief, the new coalition government may unravel in the coming months. Shehbaz could opt for early general elections later this year as political tensions heat up and economic conditions worsen. But with Khan attracting massive crowds in street protests since his downfall, a return to power for the nation’s former cricket captain cannot be ruled out.

Given the uncertainty in Pakistan, major powers in the Gulf and the Middle East would be wise to monitor developments in Islamabad from a safe distance.


The writer, @arifcrafiq, is president of Vizier Consulting, LLC, a political risk advisory company focused on the Middle East and South Asia, and a non-resident scholar at the Middle East Institute.


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