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A roller-coaster ride

Maleeha Lodhi (FINE PRINT) / 28 December 2012

The year ends on a note of uncertainty even as Pakistan approaches a critical milestone in its political history: The transfer of power from one elected government to another.

 Public uncertainty is not regarding whether elections will take place — they will be held no later than May 2013 — but rather what might emerge after the elections.

Adding to this uncertainty is the danger that a prolonged period of electioneering could delay urgent policy actions needed to avert an economic crisis – delay that could drive a precarious economy over the cliff.

A mixture of hope and anxiety characterises the public mood. Hope that the election result will put an end to the drift and disarray of the past five years. But also fear that the outcome may not bring enough change to put the country on the path to economic recovery and better governance.

The outgoing year offered signposts for both continuity and change. By-elections in November saw the reassertion of traditional politics, giving an early edge to former Prime Minister Nawaz Sharif’s Pakistan Muslim League (PML-N). But there were also signs that Pakistan was headed towards the most unpredictable election in its history. A political landscape significantly transformed by socio-economic developments and changing demographics opens possibilities for new voter alignments. Substantial addition of new voters and the youth bulge—almost half the electorate is under 35 — imparts a greater ‘swing’ factor to the next election.

The shifting rural-urban balance in Punjab (more rural constituencies with urban features) and a larger urban middle class has also injected new dynamics into elections. Together this could produce many surprises, upset traditional balances and even realign Pakistan’s politics.

Opinion surveys during 2012 seemed to support these possibilities. Most indicated that elections would be a three-way fight, between the Pakistan Peoples’ Party, PML-N and Imran Khan’s Tehreek-e-Insaf. Surveys also found a much larger number of ‘swing’ voters. This throws the election wide open.

If the electoral fortunes of political aspirants seem difficult to predict there was no mistaking a dominant feature of 2012: judicial activism and the consequent rebalancing of power between state institutions. The Supreme Court intervened with extraordinary speed in many areas. Often this earned wide praise but at other times, its actions invited controversy. What encouraged judicial activism was the void in governance left by a ruling coalition preoccupied by working the spoils system, rather than addressing the country’s mounting problems.

The incident that shook the country but also fleetingly united it was the brazen attack in October on Malala Yusufzai, the young champion of girls’ right to education. But the government squandered an opportunity for a decisive push against militants by failing to even move a parliamentary resolution authorizing such action.

The outgoing year also saw a record surge in sectarian violence and a rise in assassinations and attacks on places of worship. Overall, incidents of terrorist violence declined but casualties went up. This was a grim sign that defeating militancy remained a distant goal.

Gains made in preceding years by military actions in the tribal areas seemed fragile especially as security there remained linked to the war in Afghanistan. The uncertainties of the 2014 transition, when most Nato forces will depart Afghanistan, continued to cast a shadow on the stability of Pakistan’s border region.

While this external challenge loomed, a deteriorating economy posed the most immediate threat to Pakistan’s stability. In 2012 all the signs of an impending economic storm were apparent. Growth stagnated, domestic and foreign investment dried up, the budget deficit hit its highest point since 2008 and national debt reached a record high.

The rapidly weakening external position posed a heightened risk to the economy. This was reflected in the rise in the current account deficit and steady depletion of foreign exchange reserves. With dwindling foreign capital inflows and looming external liabilities, including repayments to the IMF, the country moved closer to being unable to meet its financing requirements. By end-2012 foreign exchange reserves held by the State Bank dropped to $ 8.5 billion. This raised the specter of reserves plunging in a few months’ time to barely enough to cover a month of imports. This would make a balance of payments inescapable.

The key question is whether such a crisis can be averted by timely action by a new government well before an economic meltdown threatens. This turns on a more consequential question: will elections produce more of the same or a way out of the country’s present mess?

Dr Maleeha Lodhi served as Pakistan’s ambassador to the US and United Kingdom

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