What's Driving Pakistan's Political and Economic Troubles – Foreign Policy

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Pakistan is going through a particularly challenging time, even by the standards of its reputation as a crisis-prone country. Since former Pakistani Prime Minister Imran Khan lost a parliamentary vote of no confidence and was ousted from office in April, the cricketer-turned-politician has been threatening continued street protests by his supporters to demand early elections.
The nation is polarized—between Khan’s supporters and followers of Pakistan’s traditional political parties, between Islamists and supporters of Western democracy, and between proponents of the military and its detractors. Khan’s opponents identify him as a dangerous populist refusing to follow democratic norms. His supporters see him as an anti-corruption messiah who has been removed from office through a U.S.-backed conspiracy.
Khan has encouraged his followers to fight his opponents like early Muslims fought unbelievers. Members of Khan’s Pakistan Movement for Justice (known in Urdu as Pakistan Tehreek-e-Insaf or PTI) have abused politicians opposed to him in restaurants and public places, leading to brawls. Prime Minister Shehbaz Sharif, who was elected by parliament in April after Khan’s removal from office, was heckled by PTI supporters while on a religious pilgrimage to Islam’s holiest places in Saudi Arabia.
Pakistan is going through a particularly challenging time, even by the standards of its reputation as a crisis-prone country. Since former Pakistani Prime Minister Imran Khan lost a parliamentary vote of no confidence and was ousted from office in April, the cricketer-turned-politician has been threatening continued street protests by his supporters to demand early elections.
The nation is polarized—between Khan’s supporters and followers of Pakistan’s traditional political parties, between Islamists and supporters of Western democracy, and between proponents of the military and its detractors. Khan’s opponents identify him as a dangerous populist refusing to follow democratic norms. His supporters see him as an anti-corruption messiah who has been removed from office through a U.S.-backed conspiracy.
Khan has encouraged his followers to fight his opponents like early Muslims fought unbelievers. Members of Khan’s Pakistan Movement for Justice (known in Urdu as Pakistan Tehreek-e-Insaf or PTI) have abused politicians opposed to him in restaurants and public places, leading to brawls. Prime Minister Shehbaz Sharif, who was elected by parliament in April after Khan’s removal from office, was heckled by PTI supporters while on a religious pilgrimage to Islam’s holiest places in Saudi Arabia.
Parliamentary elections are not due until next year, and Sharif can stay in office until October 2023 as long as he retains support of the majority in parliament. But the specter of political conflict, coupled with an economic meltdown, continues to haunt the government. Khan is also not on completely secure ground. He and his party face the prospect of disqualification from politics as the Election Commission of Pakistan completes an eight-year investigation against them for allegedly unlawfully receiving funding from foreign individuals and corporations.
Meanwhile, Pakistan’s economy is in free fall. The Pakistan rupee, which traded at 121 to the U.S. dollar before Khan became prime minister, had already fallen to above 186 to the dollar by the time he left office in April this year. It has since fallen further and is now trading at 240. Pakistan badly needs a stalled International Monetary Fund (IMF) program to get back on course. Unlike in the past, none of Pakistan’s foreign friends seem eager to bail it out without the discipline of IMF conditionalities.
Despite the hardship caused by Khan’s policies while in government and his intransigence since losing power, conventional wisdom is that Khan’s political base remains intact. If anything, he has gained some support for being a leader willing to stand up for Pakistan and resisting dictation by Western powers. Khan’s PTI party won a string of by-elections in Pakistan’s most populated province, Punjab, and retained control of its regional government.
To Khan’s followers, it does not matter that the United States and the West are disinterested in Pakistan since the U.S. withdrawal from Afghanistan. They seem ready to believe their leader when he tells them, falsely, that Pakistan would benefit from a close relationship with Russia and that Pakistan’s sovereignty is threatened by an alliance among India, Israel, and the United States.
The cause for the relative success of Khan’s rhetoric can be identified in the national narrative that Pakistanis have been fed for decades under successive civilian and military governments. Pakistanis have generally been kept blissfully unaware of Pakistan’s international reputation as a terrorist safe haven or the country’s relative global isolation.
Pakistan’s boisterous media identifies political corruption as the country’s bigger problem—not its low literacy rate, inadequate tax collection, poor standards of higher education, low agricultural and industrial productivity, and extreme dependence on external assistance and borrowing.
The Pakistani national narrative, reinforced through school curricula and the media, is believed by most salaried Pakistanis, who form Khan’s core support base. This includes military men, civil servants, and professionals (such as doctors and engineers often employed by the government), who mostly live in government housing and send their children to government-subsidized schools.
Pakistan is portrayed in its internal discourse as a citadel of Islam, a special country that God created and endowed with natural wealth and productive people. Its poor economic performance is attributed to plundering by corrupt politicians, whose wealth is allegedly stashed in overseas bank accounts. Although many influential Pakistanis, including politicians from all parties, have offshore companies and foreign bank accounts, sometimes hiding income from corruption, the country’s economic failure has multiple causes. At around 4 percent of GDP, Pakistan has one of the world’s highest defense spending rates and lags behind in tax collection. But complex economic problems are simplistically attributed to politicians’ corruption.
Khan still promises Pakistanis that he will bring back “billions” of dollars of “stolen” wealth in overseas accounts, even though he failed to secure any large-scale repatriation of such wealth during his three and a half years in government.
The other element of the belief system that fuels Khan’s rhetoric relates to foreign relations. Pakistan’s leaders have long described Pakistan as the victim of international conspiracies. “India is Pakistan’s permanent enemy,” the story goes. “Israel and the United States do not like Pakistan because it is the world’s only nuclear-armed Muslim country; Pakistan must protect itself against external conspiracies through unconventional warfare (i.e., jihadi militancy).”
The depth of the Pakistani narrative can be illustrated by Pakistan’s decision not to make public the major step it took in June by detaining Sajid Mir, one of the masterminds of the 2008 Mumbai terror attacks. For years, Pakistani officials had denied that Mir even existed and suggested that if he existed, he was already dead. His arrest amounted to fulfilling a long-standing international demand to hold Pakistanis who were responsible for terrorism abroad accountable.
The immediate reason for Pakistan’s action was to fulfil the demands of the United Nations Financial Action Task Force (FATF) on terror financing and money laundering. Pakistan has been on the group’s watch list since 2018, and action against Mir was one of the FATF’s requirements for taking Pakistan off the list. Pakistan has been on the watchlist twice before: in 2008 and 2012. It got off in 2010 and 2015 after fulfilling FATF demands, only to be sanctioned again.
Being on the FATF’s gray list, as the watchlist is called, created difficulties for Pakistan in international financial transactions. But while Pakistan has fulfilled a key condition to get off the FATF gray list, its leaders chose not to announce Mir’s arrest to their own people for fear of backlash from supporters of jihadi terrorism within the country. It was only after an intrepid journalist of Pakistani origin broke the news in Nikkei Asia that Mir’s arrest was publicly revealed.
For years, Pakistanis have expressed mixed feelings about terrorists. Pakistan’s internal discourse has portrayed jihadi terrorists against India as “freedom fighters” seeking “liberation” from India for the restive majority-Muslim region of Jammu and Kashmir. Pakistan’s former military ruler, Gen. Pervez Musharraf, publicly acknowledged that Pakistan trained Kashmir militants and that those deemed terrorists by the rest of the world were heroes to Pakistanis.
Musharraf was considered a U.S. ally in the war against terrorism for his cooperation in arresting and handing over several hundred al Qaeda terrorists to the United States after 9/11. Yet for all his cooperation against al Qaeda, Musharraf’s administration pursued a dual policy by continuing to support the Taliban in Afghanistan and the Islamist militants attacking inside India.
More recently, Khan shocked the world by describing former al Qaeda leader Osama bin Laden as a “martyr” and the recent Taliban victory in Afghanistan as breaking the “shackles of slavery.” After being ousted from office, Khan called for a new freedom struggle and jihad to rid Pakistan of Western influence.
Announcing the arrest of a key figure in a group that justified the Mumbai terrorist attacks as part of Kashmir’s liberation struggle could have been described by Khan as yielding to Western pressure. Khan has repeatedly argued that Pakistani authorities act against jihadi militants only to please the West and has been largely reluctant to criticize attacks on civilians by groups fighting to expel foreign occupiers. Khan’s argument, supported by many retired military officers (including several who have previously served in Pakistan’s Inter-Services Intelligence), is that Pakistan is unfairly targeted over actions similar to those that many countries take in the interest of national security.
Khan’s political opponents may yet be able to stop him from winning the next general elections and returning to power. But they cannot undo years of propaganda that have made Pakistanis vulnerable to conspiracy theories and given them an unrealistic understanding of what ails their country.
Pakistan’s domestic narrative is the reason why it has always moved one step forward, one step back in acting against terrorist groups even though it has promised to do so since 9/11. Support for Islamist extremism has been a major factor in depriving Pakistan of large amounts of U.S. aid and one of the reasons the country’s economy cannot easily be brought back on track. Large-scale investment is unlikely to come to a country seen as constantly tarred with allegations of being soft on terrorists.
Husain Haqqani is the director for South and Central Asia at the Hudson Institute. He served as Pakistan’s ambassador to the United States from 2008 to 2011.
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