EDITORIAL: The chaotic scenes witnessed in Islamabad on November 26, marked by clashes between PTI protesters and security personnel as the former marched into the city’s Red Zone, demanding the release from prison of party founder Imran Khan, represent all the hallmarks of a system in crisis.
One can only be thankful that the protest was called off abruptly in the early hours of November 27 before there could be any further loss of life or property. It goes without saying that beyond the very obvious harm to the country’s democratic credentials, such turmoil inflicts equally devastating damage on an already fragile economy.
With the federal capital in lockdown, tens of thousands of security personnel and emotional protesters on the streets and internet services largely suspended, the disarray on display can be tied to several detrimental developments on the economic front, highlighting how political instability, along with hardened stances and inflammatory rhetoric from all sides can swiftly undermine investor confidence and disrupt economic activity.
The Pakistan Stock Exchange (PSX) experienced its worst-ever single-day drop, plummeting by 3,505.62 points as panicked investors offloaded shares, reflecting their profound apprehensions about the escalating political tensions.
To compound problems, the country’s sovereign dollar bonds also saw a sharp decline amid the backdrop of violent clashes between protesters and law enforcement personnel. While the PSX recovered ground the following day, the volatility underscores the fragility of investor confidence, underscoring the broader economic risks posed by the ongoing political uncertainty.
Another worrying development, highlighted in a report in this newspaper, is that external borrowing budgeted for the current fiscal year hasn’t materialised as hoped despite Pakistan being in an IMF programme.
The belief that being locked into an IMF programme simplifies attracting external loans is clearly proving to be a shaky one. The country was able to borrow USD 1.723 billion from multiple financing sources during the first four months of FY2024-25 compared to USD 3.847 billion it borrowed during the same period of last year, according to the Economic Affairs Division.
Notably, the government had budgeted time deposits of USD 9 billion, including USD 5 billion of KSA time deposits and USD 4 billion of SAFE China deposits for the current fiscal year; however, no money was received under these heads in the July-October period. It is evident that what external debtors seek is certainty regarding the timely return of loans and the continuity of economic policies — conditions that cannot always be guaranteed in a volatile political climate marked by violence, unrest, citywide shutdowns and hindrances to economic activity.
It is patently clear that for the sake of the country’s economic survival, both the ruling coalition and the PTI need to move away from their aggressive postures and explore avenues to de-escalate tensions.
And as has been repeatedly highlighted in this space before, the larger onus for this de-escalation lies on the government as it bears the ultimate responsibility for maintaining order in our cities and ensuring stability of the political and economic climate.
The way it responded to the PTI’s protest call revealed a panicked administration, led by the interior minister, making one flawed move after the other, further intensifying the unrest. The government must recognise that engaging in sincere negotiations with the PTI and seeking to resolve at least some issues could significantly ease its own challenges.
For instance, it could consider releasing some PTI members who have been imprisoned for over a year without their cases being brought to trial. Similarly, the PTI leadership should also adopt a more measured approach, as its current provocative posturing hasn’t helped it achieve its goals beyond considerably embarrassing and humiliating the rulers. A path of dialogue and compromise is the only way to steer the country out of this crisis.
Copyright Business Recorder, 2024
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