Can Shehbaz Sharif Overcome the Challenges?

 

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Shehbaz Sharif is back as Pakistan’s Prime Minister, and he’s facing a daunting task. The country is grappling with a fragile economy, escalating security threats, intense political polarisation, and complex diplomatic challenges. It’s going to take all of his leadership skills to steer Pakistan through these turbulent times.

The start of his second term has been ominous, to say the least. A group of judges from the Islamabad High Court have made some startling allegations. They claim that the powerful Inter-Services Intelligence (ISI) agency has been interfering with judicial decisions, using personal connections and family ties to influence the judges. The letter they sent to the Chief Justice even named specific judges who faced reprisals for rulings that went against Imran Khan.

This saga highlights the power struggles at play in Pakistan, with the judiciary, intelligence agencies, and political leadership all vying for influence. The allegations of interference raise serious concerns about the independence of the judiciary and its ability to operate freely. A commission is now investigating the claims, and the outcome will be crucial for the credibility of Pakistan’s institutions.

The country is grappling with a fragile economy, escalating security threats, intense political polarisation, and complex diplomatic dynamics. It’s going to take all of Sharif’s leadership skills to steer Pakistan through these turbulent times.

Unstable Economy

While the political drama unfolds, Shehbaz Sharif’s government is also grappling with an unstable economy burdened by debt. The fiscal deficit is a major concern, currently standing at 7.9% of GDP. Sharif’s team is working to bring that down to less than 7%, but that’s easier said than done.

Modernising the tax system to improve revenue collection is one priority, but the real headache is the growing circular debt in the energy sector. By February 2024, this debt had reached a staggering Rs 2.635 trillion. Addressing this issue requires a multi-pronged approach, focusing on tariff rationalisation, loss reduction, and efficiency improvements in power generation and distribution.

Energy Sector’s Circular Debt

Circular debt poses a significant problem for the energy sector and the broader economy. This cycle of debt is a real headache—the government subsidises energy to keep prices low for consumers, but this means the energy companies don’t generate enough revenue to cover their expenses. So they end up borrowing money, and the debt just keeps piling up. Eventually, the government has to step in and bail out the sector, only for the cycle to repeat itself. Resolving this circular debt issue is going to require some comprehensive reforms. Improving energy pricing, reducing subsidies, enhancing efficiency in production and distribution, and strengthening financial management in the sector—are all crucial steps. It’s a complex problem, but Shehbaz Sharif and his team will need to tackle it head-on. Restoring stability and fuelling economic growth will be crucial, not just for Pakistan’s financial health, but for the overall wellbeing of its people.

Exports and FDI

Enhancing exports and attracting foreign direct investment (FDI) will also be key priorities. FDI is an important driver of economic growth, as it brings in capital, technology, and expertise from abroad. In 2022, Pakistan’s exports were worth $31.8 billion, but FDI has been fluctuating. From July 2022 to June 2023, FDI in Pakistan amounted to $1.456 billion, which was a decrease of $480 million from the previous year.

To boost competitiveness and attract more FDI, Sharif’s administration will need to focus on cutting business costs, providing incentives for exporters and foreign investors, and improving the overall investment climate. Revitalising key sectors like agriculture, manufacturing, and services will also be important.

Security Challenges

Now, let’s talk about the security challenges. The Taliban’s return to power in Afghanistan has led to an increase in terrorist activities in Pakistan, posing a serious threat to regional stability. Groups like Al-Qaeda, Lashkar-e-Taiba, Jaish-e-Mohammed, and the Tehrik-i-Taliban Pakistan have been linked to many high-profile attacks, bombings, and armed conflicts in the country.

The Dasu Dam attack and the Baloch Liberation Army’s attacks on Chinese-funded projects in Balochistan have highlighted the danger posed by these extremist elements. Sharif’s administration will need to address the root causes of extremism, enhance security, and foster regional cooperation to combat terrorism.

This will involve investing in education and de-radicalisation programs, as well as improving intelligence sharing, law enforcement coordination, and counterterrorism capacity building. The Paigham-e-Pakistan initiative, launched in 2018 to counter extremist narratives and promote moderate Islam, could be an important tool in this effort.

Domestic Politics

Political opposition is another challenge that Sharif will have to navigate. Imran Khan’s PTI party poses a significant challenge to the Shehbaz Sharif government. Respecting the independence of democratic and constitutional institutions will be crucial, as will avoiding partisan interventions and ensuring due process for legal challenges and electoral irregularities.

Sharif’s approach will probably be multifaceted, as he’ll need to balance the interests of various stakeholders and assert civilian authority. The tensions between civilians and the military, with the military exerting control over security and foreign policy, will be a delicate issue that Sharif will have to carefully manage. Sharif’s inclusive governance strategy, which involves engaging with various stakeholders to promote consensus and reduce polarisation, could be an effective way forward. Focusing on socio-economic development to improve the lives of ordinary Pakistanis could also strengthen his government’s position.

Diplomatic Challenges

Navigating Pakistan’s diplomatic relations will also be a significant challenge for Shehbaz Sharif. Balancing the country’s relationships with the United States, China, India, Iran, and Afghanistan will require strategic skill and deft diplomacy.

Pakistan and USA

The US-Pakistan partnership in the war on terror has been a tumultuous one. After 9/11, Pakistan became a valuable ally of the US, offering support and intelligence in the fight against al-Qaeda. The US provided substantial aid to Pakistan, but the relationship soured when the US accused Pakistan’s intelligence agency, the ISI, of aiding the Afghan Taliban and terrorists.

The tensions continued over US drone strikes, alleged Afghan Taliban support, and Pakistan’s nuclear program security. In 2018, the US stopped its military aid to Pakistan because of their inability to combat terrorist groups, further worsening relations. Despite these challenges, both countries recognise the need for a working relationship, and efforts have been made to improve dialogue and cooperation in areas like intelligence sharing, counterterrorism, and border security.

To protect Pakistan’s interests and strengthen ties with the US, Shehbaz Sharif’s administration should focus on economic partnerships, counter-narcotics cooperation, and regional security dialogues. Navigating the complex geopolitical landscape and balancing relationships with major powers and regional neighbours will be a critical test of Sharif’s leadership.

Faced with these daunting challenges, Shehbaz Sharif will need to draw on all his experience and political acumen to steer Pakistan towards stability and prosperity. It won’t be a straightforward task, but the stakes are too high for him to fail. With decisive leadership, a clear vision, and a commitment to democratic principles, Sharif can help Pakistan overcome these turbulent times and set the country on a path to a more promising future.

Pakistan and China

Shehbaz Sharif’s government faces a complex challenge in managing Pakistan’s relationship with China. The two countries enjoy a strong and cooperative friendship that dates back to the Cold War era. This partnership was forged to counter regional powers and establish a presence in the Indian Ocean.

The China-Pakistan Economic Corridor (CPEC) has transformed this relationship even further. CPEC is China’s ambitious infrastructure project that aims to connect Xinjiang, China with Gwadar Port, in Pakistan. This project includes highways, railways, power plants, and economic zones. For China, investment, infrastructure development, and access to Pakistani markets serve its strategic interests in the region.

China maintains robust defence ties with Pakistan and is their major arms supplier. In fact, China provided Pakistan with 73% of its military equipment imports from 2017 to 2021. This military cooperation goes beyond just arms sales, with the two countries collaborating on exercises and intelligence sharing, and China supporting Pakistan’s nuclear and missile programs.

The development of Gwadar Port is important for both countries. Pakistan benefits economically through trade and maritime activities in the Arabian Sea, while China gains strategic advantages from its position in the Indian Ocean.

Navigating this “all-weather” friendship with China is crucial for Shehbaz Sharif’s government. While the partnership brings significant benefits, Islamabad must also address concerns about debt sustainability and sovereignty related to CPEC projects. Carefully balancing this relationship will be a delicate challenge, but one that is vital for Pakistan’s future.

Pakistan and India

Shehbaz Sharif’s government has a formidable challenge on its hands when it comes to addressing the disputes with India, particularly the contentious issue of Kashmir. Resolving these tensions and reviving the peace process would be a crucial step towards promoting regional stability.

The recent willingness of Pakistan to restore trade ties with India has sparked plenty of discussion. Pakistan is hoping to gain some much-needed economic benefits through this regional trade, as it grapples with low growth rates, high inflation, and balance of payments issues. Foreign Minister Muhammad Ishaq Dar has emphasised the eagerness of the business community to resume trade with India and highlighted the negative impact that IMF conditions have had on Pakistan’s production.

There’s an international study that points to the huge untapped trade potential between the two nations—the potential economic benefits of revitalising these trade relations could be substantial. But it’s not just about the economics. As Pakistan’s GDP continues to lag far behind India’s, and with strained relationships with neighbours like Afghanistan and Iran, the stability of ties with India could prove very helpful for Pakistan’s geopolitical positioning.

However, engaging with India is a contentious issue within Pakistan, because of the long history of tensions and unresolved conflicts. Pakistan briefly allowed trade in sugar and cotton with India in 2021, but quickly reversed the decision, underscoring the complexities involved. Restoring trade ties is not just an economic calculation—it also involves political and strategic factors.

Another major source of tension between India and Pakistan is water resource management. The Indus Waters Treaty, signed in 1960 and brokered by the World Bank, regulates the distribution and utilisation of the Indus River and its five tributaries. It’s a remarkable achievement in water diplomacy, but it’s faced significant challenges over the years.

The Kashmir conflict complicates water sharing between the two countries, and India’s construction of water infrastructure projects has raised concerns in Pakistan about disruptions to its water supply. This has led to increased tensions and accusations of treaty violations. With climate change causing the alarming melting of Himalayan glaciers that feed the Indus River system, the sustainability of the treaty is under threat.

Some in India are even calling for the renegotiation or withdrawal of the treaty, citing water security concerns and the need for more flexibility in resource management. But that could easily escalate tensions and lead to open conflict over water resources, destabilising the entire region.

Resolving these water disputes and ensuring the treaty’s sustainability will require a joint effort. Strengthening dispute resolution mechanisms, promoting transparency, and exploring innovative solutions to address climate change impacts—will all be crucial. The Indus Waters Treaty is vital for India-Pakistan water diplomacy, but it faces significant challenges. Fair and sustainable water sharing is essential for regional stability between these two nuclear-armed neighbours, and it’s an issue that Shehbaz Sharif’s government will have to navigate with great skill and care.

Pakistan, Iran and Afghanistan

Shehbaz Sharif’s administration has its work cut out when it comes to balancing Pakistan’s relations with its neighbours, Afghanistan and Iran. It’s a delicate diplomatic dance that requires a nuanced approach.

With Afghanistan, constructive engagement with the Taliban government is crucial for regional stability. Sharif’s team should prioritise dialogue and cooperation to encourage inclusive governance, protect human rights, and safeguard the rights of minorities and women. Pakistan’s peace efforts and humanitarian aid can play a vital role in stabilising the region. But Sharif will have to strike a careful balance—engaging with the Taliban without compromising on core values and principles. It’s going to take some skilled diplomacy and negotiation to convince the Afghan government to adhere to international norms and respect their country’s sovereignty.

And then there’s Iran. The relationship between Pakistan and Iran is influenced by a complex web of regional rivalries, sectarian tensions, and economic cooperation prospects. Navigating these dynamics will require Sharif to be a master strategist. The two countries have common interests in areas like trade, energy cooperation, and combating terrorism. Improving economic ties and connectivity can benefit both nations and promote regional stability.

But Sharif will have to be cautious of the sectarian tensions and regional rivalries, especially between Iran and Saudi Arabia. Diplomatic manoeuvring and strategic engagement will be necessary to balance these competing interests and advance cooperation. A pragmatic and inclusive approach to relations with both Afghanistan and Iran will be crucial.

Conclusion

Prioritising dialogue, cooperation, and human rights will be the key, as Shehbaz Sharif’s team works to promote stability and prosperity in the region. The road ahead is undoubtedly challenging. With decisive leadership and a clear vision, he can navigate Pakistan through these turbulent times and set the country on a path to prosperity. It won’t be easy, but the stakes are too high to fail.