In recent years, Pakistan’s economic survival has been increasingly linked with the conduct of its foreign policy. And so when last April the then-PTI government was ousted in a no-confidence vote, some expectations had developed that the PDM government would be able to restore Pakistan’s ties with important countries after quite a bit of diplomatic turbulence during Khan years. A year later, while there is some progress, it is nearly not enough to help the country on the macroeconomic front.

Starting off with the most-important of bilateral ties, the Shehbaz government made efforts to revive Pak-China economic partnership under CPEC. While the PM received favorable reception in the Chinese press early on, the so-called ‘Shehbaz speed’ ran into macroeconomic road bumps at home. This left little fiscal room to launch CPEC mega-projects and priority SEZs. Considering the economy is getting weaker and remains even more dependent on Chinese bailouts, it does little to inspire confidence in Beijing. While Pakistan’s economic survival is a reputational issue for China, there are limits on how it can help.

While there was notable success in rebooting the US-Pak ties, the increased engagements have yet to materially benefit the economy. Risking India’s diplomatic ire and ignoring ex-PM Khan’s regime-change-conspiracy diatribes that continued for better part of 2022, the Biden administration pivoted and began paying attention to Pakistan last year. This was evident in high-profile meetings, Washington’s support for taking Islamabad off the FATF grey-list, and financial help during the floods. However, the US is yet to provide significant support economically, including at the IMF, where things have dragged on for too long.

The past twelve months also did little to change the patron-client dynamic in Pakistan’s ties with GCC majors. While PM Shehbaz went to great lengths to reassure the Gulf rulers about Pakistan’s longstanding security commitments and economic revival prospects, the turmoil at home and deepening financial dependency has apparently caused concerns. Investment-climate deterioration has affected plans for G2G privatization FDI – worse, it It has become harder to secure loans from these countries.

During the past year, some much-needed balance was finally restored in the country’s foreign policy. For instance, Russia was engaged without giving out the vibe that Islamabad had turned against the West. The downhill relationship with countries such as France was repaired in a shrewd manner, to the point where Paris supported Pakistan at the FATF and played a key part in the UN’s donor conference on Pakistan floods. Also, the growing outreach to Turkey did not take place at the expense of the Saudis.

A year later, the challenge has become more intense for the Shehbaz government: how can it better leverage its foreign policy choices to secure economic lifeline in the medium term? The outlook is unappealing. The unresolved geopolitical friction between US and China, especially over addressing debt-sustainability issues of countries like Pakistan that took up BRI loans in recent years, is not helpful. Moreover, even friendly countries seem to have concluded that Pakistan’s economy needs to be dealt by the IMF alone. On top of it, the perception of institutional breakdown does Pakistan no favors abroad.