What to expect in 2023

Even though the New Year was ushered in with roaring celebrations across the world, from Sydney to Beijing, the arrival of 2023 comes with plenty of strings attached. A more realistic assumption would be to temper expectations of a probable global recovery from the aftermath of the Ukraine war, the pandemic and heightened tensions between the United States and China. For Pakistan, 2023 is all about managing economic expectations and ensuring that policy making is geared towards providing relief to the masses beyond constituent politics. Navigating the delicate balance between internal and external factors will prove to be decisive for Islamabad.

In the aftermath of the 2022 floods, where agricultural stock supplies are low and prices of domestic products are skyrocketing, there is a need to temper inflation, affecting the lives of millions of Pakistanis across the country. Even countries such as Japan have resorted to hiking their national interest rates, which means purchasing bonds will become more expensive for the recipients of Japanese aid. While such drastic measures may be off the cuff for Pakistani policy makers, it is critical to draw key lessons on economic recovery packages that go beyond restricting commercial activities in big cities and harming the livelihoods of average citizens.

Then comes the question of debt servicing. The ability of the current set up to address the requirements of the IMF mandate structural changes in 2023, without which the probability of Pakistan defaulting increases. One of the reasons why the Sri Lankan economic crisis blew out of proportion was due to the Rajapaksa dynasty in Colombo refusing to adopt policies which were people-centric and included, but were not limited to, negotiating with the IMF for structural relief. The result was a complete collapse of what was South Asia’s most prosperous country. Pakistan should refrain from making the same mistakes as Sri Lanka.

Beyond economics is maintaining political stability, which is compromised due to the ruling elite’s defiance and the Pakistan Tehreek-e-Insaf’s (PTI) persistence to retaining power at the Centre. The political impasse has had a detrimental impact on the confidence of investors, as the fragile nature of Pakistan’s democracy is tested up to the hilt. Lack of political consensus, dialogue, outreach strategies and allaying differences through table talks are already worsening the situation as burgeoning local support for PTI chairman Imran Khan now characterises Pakistan’s economic landscape. While there is little doubt that popular support is slated towards the PTI, even Pakistan’s most popular party will find navigating domestic and international challenges to be a tedious and cumbersome task.

Pakistan’s place in the international system, while not under threat, is definitely not encouraging. India’s boisterous nature with its nefarious hegemonic designs under the garb of a vicious Hindutva ideology pose a challenge to Pakistan’s international diplomatic efforts as opinion is slated towards pandering to commercialism in India’s trillion-dollar economy. It is hence, important to set one’s domestic house in order, kick-start industrialisation through incentivisation and address the energy shortages, and maintain enough economic capital to market to the world.

One of the positives of Pakistan’s foreign policy has been its unrelenting pursuit to balance relationships with major powers as well as the Muslim world. Pakistan has refrained from partaking in any exercise that compromises relations with either Saudi Arabia or Iran, particularly as both Riyadh and Tehran are embroiled in a devastating proxy warfare that is destabilising the social fabric of the Middle East. Similarly, while ties with China remain unbreakable, there have been efforts to capitalise on relations with the United States, historically based on counterterrorism, Afghanistan and transactional approaches on regional security.

Many of Pakistan’s problems on the security front, however, remain regional. The rise of the Afghan Taliban has coincided with an uptick in violence perpetrated by the Tehreek-e-Taliban Pakistan (TTP) who have managed to penetrate the federal capital of a nuclear state. It is thus incumbent that militant extremism is tackled through multipronged approaches that are not limited to deradicalisation alone. Pressurising the Taliban regime to rein in terrorists and proxies, without which diplomatic relations could be compromised with Afghanistan, is the right approach, particularly as the world watches in dismay as human rights abuses take place unabashedly in the country. Pakistan’s future hinges on tackling the internal security threat and ensuring that no soil is used to disrupt its security landscape.

2023 is also an election year for Pakistan and this offers an opportunity for public mandates to take precedence. The performance of the current government offers little hope in the economic woes of the common man ameliorating. But there is hope of a democratic transition that could result in legislation that better tackles economic problems. Prior to the elections, heightened and polarising rhetoric could create fissures in the social landscape, but that too offers an opportunity for Pakistan to find a middle ground politically.

All in all, 2023 could be a rocky year for Pakistan, but international and domestic variables will have a huge impact on Islamabad’s progress towards stability, economic prosperity and an improvement in the lives of millions of people who are currently confronting economic quagmires.

The writer is an Assistant Research Associate at IPRI