In order to facilitate the upcoming election Pakistan’s caretaker Prime Minister Anwaarul Haq Kakar’s 18 member cabinet took oath on August 17, 2023. The cabinet will see Pakistan through their upcoming elections. The caretaker government will stay in power till the general elections are conducted and will ensure a seamless transition of power. Pakistan president Arif Alvi administered an oath to the caretaker Cabinet at Aiwan-e-Sadr, the presidential house. According to an official statement, 16 federal ministers and 3 advisers are part of the Cabinet. Former foreign secretary Jalil Abbas Jilani has been appointed as Foreign Minister, Sarfaraz Bugti as Interior Minister, Shamshad Akhtar as Finance Minister, Lt Gen (retired) Anwar Ali Haider as Defence Minister and senior journalist Murtaza Solangi as Information Minister.
Pak Election
In April 2022, a no-confidence motion against Imran Khan led to his removal as the prime minister of Pakistan. The decision to file a no-confidence motion against sitting Prime Minister Imran Khan of Pakistan Tehreek-e-Insaf (PTI) – who had held the position since the 2018 election – was taken at a summit of the opposition parties, united under the Pakistan Democratic Movement (PDM) alliance. Khan alleged that the United States was behind a “foreign conspiracy” to oust him in a regime change, and that he had written evidence attesting to this. Khan claimed that he possessed a diplomatic cable dated 7 March, in which a “threat” was issued by the US government stating their desire to see Khan’s ousting from office, with the stipulation that Pakistan would be “forgiven” if the motion against him succeeded. The US was allegedly unhappy with Khan’s foreign policy and his visit to Russia. However, U.S. said that there is “absolutely no truth” in the allegations. Later Imran Khan also denied the allegations.
The no-confidence vote took place on 10 April and the motion was passed with a majority of 174 votes (out of 342) in the National Assembly, which resulted in Khan losing the confidence of the house and ceasing to hold the office of prime minister Thus, Khan became the first Pakistani prime minister to lose a no-confidence vote. On 11 April, 2022 Shehbaz Sharif was elected unopposed by the National Assembly to replace Khan as prime minister, as Khan’s PTI party boycotted the vote and resigned en masse from the National Assembly. Sharif’s cabinet, comprising 37 members, took oath on 19 April, 2022.
For the election to take place. Pakistan’s National Assembly was dissolved on August 9, 2023 ending the tenure of the government led by Shehbaz Sharif and paving the way for installing a caretaker setup. The general elections in Pakistan are expected to be held within 90 days. Under the Constitution, a caretaker government should be appointed to provide a neutral administration for holding the elections in a fair and transparent manner. Anwaarul Haq Kakar was apoointed Pakistan’s caretaker Prime Minister on August 17, 2023.
Imran Khans Arrest
Pakistan’s former Prime Minister Imran Khan was arrested from his residence in Lahore on August 5 after he was handed a three-year prison sentence in a corruption case. After convicting Khan, the Islamabad court issued an arrest warrant which says he is to serve his sentence in the Rawalpindi central jail in Pakistan’s Punjab province, with police in Lahore quickly moving to take him from his home.
Khan is accused by the election commission of misusing his 2018-2022 premiership to unlawfully buy and sell gifts in state possession that were received during visits abroad that are worth more than 140 million Pakistani rupees ($500,000). The conviction, which was handed down in absentia, bans Khan from political office for the next five years. Pakistan has seen its share of former prime ministers arrested over the years and interventions by its powerful military, with Khan being the seventh former prime minister to be arrested. No prime minister in Pakistan’s history has managed to complete their five-year tenure, as mandated by the country’s constitution.
Known as the asset concealment case, or Toshakhana, the gifts allegedly included watches given by a royal family, according to government officials, who have alleged previously that Khan’s aides sold them in Dubai. The gifts allegedly include seven watches, six of them Rolexes. The most expensive was a “Master Graff limited edition” valued at 85 million rupees ($300,000), according to a list shared by Pakistan’s information minister.
However, Imran Khan has maintained that he had legally purchased the items, and has denied wrongdoing. It is to be seen now whether Imran Khan manages to take part in the upcoming election.
Background of Economic Crisis
Pakistan is in a deep crisis including s political unrest and economic crisis accentuated by destructive floods in 2022. Economically, the country is grappling with severe inflation, a depreciating currency, and a critically low foreign exchange reserves, posing significant concerns for its financial stability. Pakistan’s economic crisis was at the centre of a political standoff between Prime Minister Shahbaz Sharif and his predecessor Imran Khan in 2022, which led to Khan’s ouster in April 2022. Sharif accused Khan of economic mismanagement and mishandling of the country’s foreign policy, forcing him to step down in a no-confidence vote. Amid ousting, he ignited Haqeeqi Azaadi political movement which caused nationwide political unrest calling for early elections and civilian supremacy which in result worked as a catalyst for already worsening economic condition.
The economic crisis of Pakistan became acute in June 2022 as Inflation rose to 21.3% e, the highest since December 2008 when inflation stood at 23.3%. At the end of March 2022, the State Bank of Pakistan’s reserves stood at $11.425bn, but they gradually declined to almost four-year low of $6.715bn on 2nd December. Pakistan’s foreign exchange reserves were barely sufficient for five weeks of merchandise imports. Meanwhile Pakistan drifted towards defaulting on its external debt. The consistent depreciation of the rupee further deepened the economic crisis.
In June 2022 a Chinese consortium of banks announced according to Pak Finance Minister crediting a loan of $2.3 billion to the Pakistani central bank. But the amount was inadequate in view of over $30 billion dollars in economic losses in Pakistan due to 2022 Pakistan floods in summer.
Pakistan’s economic situation started worsening in 2019 itself. Islamabad accessed the IMF for economic support. On July 3, 2019, the Executive Board of the International Monetary Fund (IMF) approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about US$6 billion or 210 percent of quota) to support the authorities’ economic reform program. The programme was aimed at helping Pakistan to reduce economic vulnerabilities and generate sustainable and balanced growth focusing on: a decisive fiscal consolidation to reduce public debt and build resilience while expanding social spending; a flexible, market-determined exchange rate to restore competitiveness and rebuild official reserves; to eliminate quasi-fiscal losses in the energy sector; and to strengthen institutions and enhance transparency. But the sequence of shocks (Covid-19, Ukraine war, 2022 floods) coupled with compounding policy reversals in the second half of the programme required multiple recalibrations and the original programme goals fell out of reach.
Pakistan had failed to satisfy the conditionality of EEF, so its review was being delayed. The Executive Board of the International Monetary Fund (IMF) completed the combined seventh and eighth reviews of the EFF) on August 29, 2022. The Board’s decision allowed for an immediate disbursement of SDR 894 million (about US$1.1 billion), bringing total purchases for budget support under the arrangement to about US$3.9 billion. The EFF of about US$6 billion which was 210 percent of quota at the time of approval was extended by the IMF until end-June 2023, re-phasing and augmentation of access by SDR 720 million that brought the total access under the EFF to about US$6.5 billion.
Meanwhile, Cash-strapped Pakistan received a rollover of $2 billion in deposits for a period of one year from to help Islamabad get a much-required bailout from the IMF to stabilise its economy on March 24, 2023. Pakistan and the IMF have been negotiating the release of a $1.1 billion loan since February but so far without any success due to the tough conditions by the donor which Pakistan is slow to fulfill.
Pakistan’s ninth review by the IMF under the 2019 Extended Fund Facility (EFF) for release of $1.2 billion — part of a larger $6.7-billion bailout package — had been pending since October 2022 as the programme’s expiry was stipulated on June 30. Rating agencies and economists had warned then that Pakistan could default on foreign debt if it fails to secure the $1.2-billion loan.
When the deadline of June 30 came closer, Pakistan failed to satisfy the IMF about steps taken by it to fulfill IMF criteria. Describing the failed four-year Extended Fund Facility (EFF) as a “missed opportunity”, the IMF blamed both the PTI and PDM, particularly under the economic stewardship of Shaukat Tarin and Ishaq Dar, for irresponsible budgetary expansion and exchange rate interventions, respectively. The IMF staff report released after the signing of the $3 billion Standby Arrangement detailed step-wise ‘stop and go’ cycles of the $6.5bn EFF that repeatedly went off the track over almost four years.
IMF’s Stand-By Arrangement for Pakistan
The Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan on July 12, 2023 for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization programme. The arrangement comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in FY23. Pakistan’s new SBA-supported programme were aimed at providing a policy anchor for addressing domestic and external imbalances and a framework for financial support from multilateral and bilateral partners. The programme’s focus was on (1) implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages; (3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience.
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