The prices for electricity and food have risen again, inflation is still at almost 20 percent: Pakistan’s population is suffering from the poor economic situation and is increasingly venting its anger on the streets. In the Pakistan-controlled part of the Kashmir region in the northeast, thousands of people demonstrated in mid-May for more state subsidies, for affordable electricity and affordable flour, as the BBC reported. Hundreds were injured and six people died.
The protests have put the government in Islamabad in a dilemma. The country is dependent on the help of the International Monetary Fund (IMF) to get back on its feet economically. In order to receive the aid, it must cut subsidies and save money. But that is unpopular. “It will be difficult to implement the reforms in line with the IMF’s wishes. People are dissatisfied and the political situation is unstable,” says Christian Wagner, an analyst specializing in Asia at the German Institute for International and Security Affairs.
In fact, Pakistan is not only groaning under economic problems, the high mountain of debt, the large export deficit and high inflation, the country is also not finding peace politically. In 2022, Prime Minister Imran Khan was deposed by a vote of no confidence. He had lost the support of the military, without which no government in Pakistan can survive. Since then, Khan has been in prison on corruption charges and has been politically sidelined. In the new elections in February, his party was not officially allowed to run, but became the strongest force because the candidates successfully ran as independents. Nevertheless, the two defeated parties, which had been established for decades, elected Shehbaz Sharif as prime minister.
The military demands reforms, despite protests
“The lack of support and legitimacy of the new government limits the scope for unpopular but necessary reforms,” says Sakib Sherani. The Pakistani analyst nevertheless expects that the government will try to implement the IMF’s reform requirements despite public resistance. The military expects this from the government because the state is dependent on the IMF’s money.
Pakistan is therefore cutting subsidies that have made electricity prices bearable for the poorer population. Tax reforms and the privatization of state-owned companies are also planned. And for the first time, wages and pensions in the public sector are being debated, says Sherani. So far, the IMF is satisfied with the budget cuts. At the end of April, after reviewing them, it released the last billion of a rescue package of three billion dollars that prevented the country from going bankrupt last summer.
At first glance, the fact that Pakistan is doing so badly economically is a paradox. Its location, bordering Afghanistan, India and China, and its ports with access to the Indian Ocean, is of geopolitical importance, which has repeatedly motivated international partners to pump money into the country. The USA has long paid Islamabad military aid to secure support in the fight against the Taliban in Afghanistan. And China, which shares a hostile rivalry with India with Pakistan, has invested billions in the China-Pakistan Economic Corridor (CPEC), a gigantic infrastructure project that Beijing has declared to be the centerpiece of the “New Silk Road.”
The system has hardly changed since colonial times
But the investments do not lead to prosperity. CPEC in particular has not created the jobs that the young generation with no prospects so desperately needs. The latest IMF payments are part of the 24th rescue package for Pakistan. No other country has had to be rescued from bankruptcy more often by the IMF. These problems have existed for many years. Beijing has also had to learn this, and it has had to keep extending the investment loans for CPEC.
“In Pakistan, many structural reforms that have led to greater social mobility and economic growth in other countries in the region have not taken place,” says Christian Wagner. Pakistan is a feudal society, land and wealth are in the hands of a few large landowners. “There have been no significant land reforms since the colonial era, no real redistribution, and education policy has hardly improved in recent decades,” says Wagner.
Not only money and land, but also political power is concentrated in a few families like the Sharifs, who now again provide the prime minister. They have little interest in reforms that would harm their interests. Instead, they compete for power within a small, barely accessible circle. Always dependent on the military, which regularly plays the civilian elite off against each other in order to secure its own monopoly on power. The system makes a small upper class rich, while the majority of Pakistan’s 240 million inhabitants live from hand to mouth.
The West must put more pressure on the power elites, says an expert
If a small, powerful elite prevents investments and attempts at reform from having an impact, why are new aid programs constantly being set up? In the West, people sometimes forget how big the country is, with its population of well over 200 million, says Christian Wagner. “Too big and too important to fail.” Because as heavily indebted as Pakistan is, it is also a nuclear power. If the political system collapsed, “the safety of nuclear weapons would immediately be called into question for the international community,” says Wagner.
Sakib Sherani criticizes the fact that Western powers are more interested in Pakistan’s political stability than in economic progress or democratic development. “Pakistan’s elites have the country firmly under control. They are mainly responsible for the poor economic situation,” he says. As long as the distribution of power does not change, IMF aid packages can only bring short-term relief.
“We need to talk about fundamental reforms that go far beyond the measures of the IMF,” Sherani demands. But this requires free elections and a military that accepts the election results. Sherani believes that the international community has a duty to put more pressure on Pakistan’s rulers. The numerous Human rights violationswhich suppress civil society should be condemned much more strongly.
Instead of fundamental reforms, the next IMF aid program is now on the horizon. Last week, initial talks between Pakistan and an IMF delegation ended without results; the amount is said to be up to six billion dollars. An agreement is not expected until the summer, when Pakistan adopts the new budget. Then the IMF will be able to better assess whether the country has saved enough.