Imran Khan plots comeback as Pakistan’s new leaders battle economic woes

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Shahid Astori, a 27-year-old electrical engineer, voted against Imran Khan when he was first elected as prime minister in 2018. His dislike of Khan only intensified during the former celebrity cricketer’s term, with Astori blaming Khan for painful inflation and an economic crisis.

Yet all that was forgiven as Astori joined thousands of demonstrators at a rally in the megacity Karachi to protest against Khan’s ousting from office last month. The former prime minister has sparked popular outrage by arguing that he was the victim of an alleged US conspiracy to remove him.

“I faced economic hardships too during Imran Khan’s government,” Astori said, his face covered in a bandanna made from Khan’s Pakistan Tehreek-e-Insaf party flag. “But today we have to defend Pakistan and Imran Khan is doing just that.”

Khan’s downfall was accelerated by widespread anger over Pakistan’s economy, creating momentum for the no-confidence vote that unseated him. In opposition, however, Khan has gone on the offensive, holding events across Pakistan to rally support and demand new elections. His narrative of a foreign conspiracy has struck a chord among many voters despite a lack of evidence.

Analysts said that stabilising Pakistan’s economic crisis would be the most effective way for new prime minister Shehbaz Sharif to parry a resurgent Khan. But with the fate of Pakistan’s IMF programme uncertain, depleted foreign reserves and double-digit inflation, observers said Sharif’s multi-party coalition needed to show quick economic results or risk losing more voters like Astori.

“The inheritance from the Khan regime, or the rubble that has been left behind for them, is quite formidable,” said Asad Sayeed, an economist at Karachi’s Collective for Social Science Research. “Nevertheless, he’s popular and is out on the streets so the only way to contain that is to have some level of economic feel-good.

“If [the new government] is able to bring some semblance of stability in the next couple of months, then it’ll be able to manage the politics better,” Sayeed continued. “But if not, then that would force their hand to go into elections sooner.”

Removing controversial fuel subsidies could deepen the economic pain for Pakistanis, who have suffered a sharp drop in living standards because of inflation © Pacific Press/LightRocket/Getty

Analysts said Pakistan was able to avoid the worst of the Covid-19 pandemic thanks to Khan’s light-touch approach to lockdowns and the country’s low rate of severe disease. Yet the economy began to overheat as growth picked up, with surging imports and global commodity prices depleting its foreign exchange reserves.

These factors heaped pressure on Pakistan’s rupee, which has fallen 20 per cent over the past year, while the yield on Pakistan’s 10-year bonds has risen more than 25 per cent owing to investor selling. The country has enough foreign reserves for only about seven weeks’ worth of imports, according to Sayeed, down from three months late last year.

One of the Sharif government’s priorities is securing international financial assistance, including a $6bn IMF programme first negotiated under Khan in 2019.

Speaking to the Financial Times shortly before being sworn into office, finance minister Miftah Ismail said Pakistan’s finances “are worse than we thought” and that “we have to put our house in order”.

Ismail travelled to Washington last month to ask the IMF to expand the programme to $8bn of aid until the end of 2023. Yet the future of the scheme is in doubt after Khan reintroduced contentious fuel subsidies originally removed at the IMF’s behest. Sharif has declined to remove them.

The IMF said last week that Pakistani authorities agreed “prompt action is needed to reverse the unfunded subsidies”, but the sides will meet for further discussions this month.

Sharif also travelled to Saudi Arabia last week in his first foreign visit as prime minister as his government seeks more aid from allies. “We will go to other friendly countries. China has always been there for us, Saudi Arabia and the EU,” Ismail said.

Pakistani and Saudi officials are discussing aid worth up to $8bn, according to senior government officials in Islamabad.

“The future depends on continuation of the IMF programme,” said Mohammed Sohail of Topline Securities, a brokerage, in Karachi. “If this government can negotiate a revival of the IMF programme, Pakistan’s situation will improve. If not, the future will be uncertain.”

But removing fuel subsidies risks exacerbating the pain for Pakistanis, who have already suffered a sharp drop in living standards because of inflation. The country’s Sensitive Price Indicator, which tracks everyday essentials such as food and fuel, rose 15.86 per cent last week from a year earlier.

It was this economic strife, along with a public rift between Khan and the powerful military, that encouraged Sharif’s Pakistan Muslim League-Nawaz and other parties such as Bilawal Bhutto Zardari’s Pakistan Peoples party to unite to remove Khan in the no-confidence vote.

Supporters of Khan, who while in office championed cash transfers and other welfare programmes, argued that Pakistan’s economic problems were the result of international factors beyond his control. “How could Imran Khan deal with what was after all a global problem?” asked Mariam Salim, a 25-year-old marketing officer at Khan’s rally in Karachi.

Khan claimed the US connived with the Sharifs and Bhutto-Zardaris, two of Pakistan’s political dynasties, to instigate his downfall as punishment for a visit to Russia in February as the war in Ukraine began.

US officials have denied the allegation while Pakistan’s military has also dismissed the charge, but it has proved a powerful narrative. Analysts warned the same economic strife that hurt Khan could work in his favour if voters began to blame Sharif.

“Imran Khan has nothing to lose if he keeps on pushing his anti-US line. It is the government that has much to lose because large numbers of people are out to support him,” one Karachi business leader said. “If the IMF programme goes off track . . . there will be a bigger fallout for Shehbaz Sharif’s government.”

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