From the CIAO Atlas Map of Asia 

Strategic Analysis

Strategic Analysis:
A Monthly Journal of the IDSA

May 2001 (Vol. XXV No. 2)


Recent Developments in Pakistan
By Shalini Chawla *



Pakistan, today, is struggling both politically and economically. The military regime which seized power in October 1999, promised to introduce "real" democracy in the country. However, it was left grappling with the problem of dealing with Nawaz Sharif, culminating in his controversial exile to Saudi Arabia. And when the government did initiate local elections, it showed signs of lack of electoral enthusiasm and discriminated against religious minorities. Also, it did not succeed in its purported goal of keeping established political parties out and building a new, 'clean' breed of politicians.

On the economic front, Pakistan was on the verge of defaulting on its external loan obligations when the International Monetary Fund (IMF) came to its rescue with a 10-month stand-by credit of US$ 596 million. However, the IMF imposed stiff conditions for the country to be able to lay its hands on a large part of the loan. Pakistan, with its record of hardly ever progressing beyond the first tranche of loan grants, is struggling to meet these conditions. The country will have to start thinking beyond a loan-sustained economy and begin building internal economic strength.

Pakistan has repeatedly witnessed military coups, sacking of popularly elected prime ministers, imprisonment of parliamentarians, suspension of the Parliament and Constitution, and frequent exiles. These seem to be regular features of the country.

Even today, Pakistan is in a state of flux. The military coup of October 1999, triumphantly gave rise to hopes that the country had been heroically rescued from the clutches of an imminent catastrophe. With the military regime came an overwhelming profusion of promises that true or real democracy would be introduced in the country to replace the sham democracy that Pakistan has witnessed over the past few years. Thus, the nation is ostensibly on a path towards restoration of democracy and is also trying to get over the economic crisis which has tightened its grip on the country and manifested itself in the form of inflation, skyrocketing prices, continued devaluation of the rupee and growing unemployment.

In the past few months there have been several distinct developments in Pakistan on the political and economic fronts. This article traces these developments in Pakistan and also attempts to analyse the implications of these developments on the political and economic structure of Pakistan.

Developments on the Political Front

Nawaz Sharif's Exile

When the military seized power once again in Pakistan, the Parliament and Constitution were suspended and Sharif was thrown in jail. This was not surprising, but the military government's decision to release Nawaz Sharif from jail and let him go into exile has thrown Pakistan's civilian political scene into disarray. This also appears to have strengthened the regime's grip on power.

Sharif flew to a luxurious exile in Saudi Arabia, on December 10, 2000, with seventeen relatives, as guests of the Saudi royal family, after entering into an agreement, reportedly, to stay away from the country for at least 10 years (until 2010) and not take part in Pakistan's politics for 21 years. In return for this exile, the ailing prime minister was granted a presidential pardon for several criminal convictions, including a 25-year sentence for hijacking and terrorism connected to the October 12, 1999 coup, and also for numerous pending charges of financial corruption during his tenure in the prime minister's office. Pakistani news organisations report that the agreement had been brokered in secrecy by members of the Saudi royal family, which is close to Pakistan. Saudi Arabia is a long time ally and trading partner of Pakistan. 1

Sharif's removal can be viewed as an important step on the part of the military government's promised return to democracy, considering that even though Sharif was in prison, his presence in Pakistan was a problem and constraint for the government. This constraint now having been removed, the Musharraf regime should feel more at ease and better placed to open up the clogged channels of democracy. Hence, this sudden move by the Pakistan government might work towards neutralising the role of Sharif and his allies in Pakistani politics. It also might have raised hopes for General Musharraf's commitment to curbing corruption and reforming the political system-the core issues in his agenda that initially caused Pakistan to welcome the coup. On the other hand, the dubious exile will cause the public to lose faith in all talk about the rule of law, and Saudi Arabia's intervention in the affair will damage the judiciary's reputation both in Pakistan and abroad.

However, since Nawaz Sharif was viewed as corrupt and autocratic before he was overthrown, people in Pakistan also feel he has been allowed to go free. The common man is grumpy, outraged and also feels betrayed. "If Nawaz Sharif really plundered the national wealth, why has he been sent abroad?," asked Mohammed Imran, a butcher in Pakistan. 2 Another statement showing disagreement with Sharif's exile came from a housewife in Pakistan, "He should have been punished so he could serve as an example". 3 The Pakistan government has claimed that the release of Nawaz Sharif and his family is in the best interest of Pakistan. But the people's reaction and the media response to this decision indicate that the military government and the importance of its agenda, its claim to purify Pakistani society of corruption through accountability, good governance and the implementation of law and justice have all become meaningless. 4 Even critics who opposed Sharif's trial, argue that he should not have been let off before being tried for all the crimes with which he has been charged, so that others hankering for power would know the results of indulging in corrupt practices.

However, it is now apparent that Pakistan's military rulers succumbed to pressure from the Saudi royal family members who threatened to withdraw the offer to provide US$600-$800 million worth of oil on deferred payment if Nawaz was not freed. Crown Prince Abdullah, who has a strong affinity with the ousted prime minister, may have played a major role in the whole episode. 5 Since Pakistan conducted nuclear tests in May 1998, Saudi Arabia has been its largest bilateral donor. Pakistan was kept afloat in the wake of international sanctions due to Saudi Arabia's crucial financial aid which included oil supply on deferred payment. The Saudis also financed Sharif's election campaign. And after Pakistan became a covert nuclear state, Sharif's link with the Saudis was further strengthened. 6

Investigation, however, also reveals a Lebanese link. Lebanese Prime Minister Rafiqal Hariri-who is of Saudi origin and a brother-in-law of King Fahd-and Finance Minister Shaukat Aziz played a key role in brokering the deal. 7

Though Sharif's release apparently came about as a result of the efforts of the Saudi royal family and other Gulf states, the move also had strong US backing. 8 The US had been hugely indebted to Nawaz Sharif for his cooperation, specifically in efforts to capture Osama bin Laden, the Saudi fugitive given shelter by the Taliban administration in Afghanistan. 9

Sharif's exile goes to show that in Pakistan crime does pay. Another impression which Sharif's exile gives is that the regime is interested more in perpetuating political power than pursuing its self-hyped accountability process. Also, Sharif's dramatic departure, which was the result of combined efforts from different international fronts raises some serious questions about Pakistan's sovereignty.

Pakistani Local Elections

About fifteen months after Pakistan's latest military coup, the country has begun to march towards restoration of democracy, with controversial elections for local governments, in what the military regime says is "genuine and grassroots democracy". Although, the deadline issued to the military regime for the restoration of democracy is October 2002 and Pakistan has been promised total return to civilian rule by the end of 2002, many are sceptical.

The first phase of local elections was held in Pakistan on December 31, 2000. The elections themselves were low profile due to the suffocating restrictions on campaigning. Elections are due to be completed by the middle of the present year, which will be followed by the convening of the councils.

The local level elections are part of Musharraf's drive for a "grassroots democracy" to depose Pakistan's traditional feudal elite, which has dominated national politics for 50 years. Up to nine million people voted in the local council elections. The voter turnout in the first phase of elections was 45.66 per cent with 19.61 per cent candidates returned unopposed and the rate of rejected votes an extraordinarily high 13.71 per cent. Chief Election Commissioner Abdul Qadeer Chaudhry announced these statistics in Islamabad. The local government polls were held in 18 of the country's 106 administrative districts and were observed by a group of 18 foreign observers from the embassies of various countries and the Commonwealth Secretariat, London. 10 Chaudhry gave four reasons for the rejection of votes. First, some voters did not stamp the ballot papers of all the five categories of candidates and left them blank. Second, some voters put the rubber stamp mark on the un-allotted symbols. Three, some voters put their thumb impressions instead of rubber stamps on the ballot paper. Four, some voters put the stamp at places where it became difficult to ascertain which candidate they had voted for. 11

Political parties were not allowed to be involved in the elections, so the results do not reflect their current level of support. However, most candidates were backed by political or community groups. Reports from Balochistan indicated that local nationalist parties supported many of the candidates and a distinctive feature was that a large percentage was elected unopposed. In the North-West Frontier Province, the main parties and local clans backed candidates.

The local polls are supposed to "devolve power to the people". For the first time in male-dominated Pakistan, women have been allocated 33 per cent of the 42,000 council seats, and district administrative, policing and financial powers will devolve to the elected representatives instead of bureaucrats. 12 Despite rain and biting cold, voters marked their ballots in unexpectedly large numbers. In fact, in parts of rural Punjab, the turnout was as high as 60 per cent. This large turnout was a boost for Musharraf, but the elections generated public criticism owing to the fact that the army banned political parties from taking part and restricted candidates to minimal electioneering. Also, no media campaign had been mounted to explain the complex voting system to a largely illiterate electorate in the country.

General Musharraf insists that disgraced old style politicians should not be getting power back in their hands, especially, Nawaz Sharif and Benazir Bhutto, who are in exile on charges of corruption. "This is not my personal view, this is the army's consensus and it is not an army of a banana republic", Musharraf told newspaper editors. 13 But the elections of the union councils turned out to be different in at least one significant aspect from the stated objectives of the government; they failed to prevent feudals and established politicians from gatecrashing the party.

Despite the government's resolve to create a new breed of politicians, what one has in the four southern districts of the Frontier province is a pot-pourri of traditional forces. 14 In Dera, for instance, the same old Miankhels are pitted against the same old Gandapurs in their familiar tribal squabble with the Makhdoom Mirid Kazim group pulling off a balancing act in the Paharpur sub-division and the so-called major group of the Pakistan People's Party(PPP) thrown in to lend political colour to the proceedings. In Tank, the Kundis hold sway, followed by Bhittanis and some Burki tribesmen. 15

Apart from the fact that the established political parties have managed to retain their hold on the local level politics, the culture of money driven politics is still evident in the Pakistani local elections. The group leaders are banking on the monetary factor in order to win the post of the district nazim, due to the absence of clear-cut political affiliations.

A majority of the seats for nazims and naib nazims and councillors have been won by candidates nominated by traditional political groups or those enjoying support from various political parties. The local bodies polls were dominated by two main political parties, the PPP and the Pakistan Muslim League (PML-Nawaz group). These two parties have been the main beneficiaries of the non-party local body elections. The chief beneficiary is the PPP which has been rehabilitated in the rural areas of the Dera Ghazi Khan and Sargodha divisions. 16 Some independent candidates were also returned and all of them were not backed by political parties, but they were relatively few in number, and thus were not able to substantiate the government's claim that the process will bring up a new breed of politicians who will radically change the country's political landscape.

The striking feature of the elections held on December 31, 2000, is the extent to which the established political families went in order to retain their grip on the local level politics. In several areas, the highly politicised non-party elections witnessed arch rivals joining hands in order to bring forward consensus candidates. In a number of districts, groups associated with the PPP and the PML formed alliances. In one union council in Dera Ghazi Khan, the Tehrik-i-Jafria Pakistan and the Sipah-i-Sahaba Pakistan-bitter sectarian rivals for over ten years-contested the elections as allies. 17 These alliances were viewed by the proponents of devolution as the emergence of new and less polarised politics, but in reality this cooperation is to get hold of power at the local level and fight the new challenges.

Some Christian and Hindu groups called for the boycott of the polls. This resentment emerged because the voters from religious minorities were only allowed to vote for a single representative on each council. This call for boycott of polls met with some success as three-quarters of the seats reserved for non-Muslims remained unfilled and will be decided in future by-elections. The minorities were outraged in the first phase of elections and they felt that a separate electorate system was discriminatory in nature. However, after the resentment from the minorities, who seem unwilling to accept the separate electorate system imposed on them, the military regime now appears to be ready to handle the pressure from various religious groups and parties and go ahead with a uniform electoral system in the country. The National Reconstruction Bureau is considering holding the local bodies polls on the basis of the joint electorate system, doing away with the separate electoral college. 18

Another factor which this first phase of elections witnessed was the urban-rural divide which was in evidence in the 1993 elections. Though the PML did lose to the PPP and other groups in many districts it had swept in the 1997 elections, it maintained its strong presence in urban areas of several districts. Thus, in urban areas once again the votes went in favour of the PML.

In these elections, electoral enthusiasm was seen to be lacking. This relative lack of interest could be attributed to various factors. The staggered form of elections itself is one of the factors. Election tempo gathers pace when the entire country is involved rather than just a sprinkling of some districts. Also, the devolution plan is complex in nature and has created too much hype about the wonders this plan is going to achieve. The election plan practically excludes political parties from direct participation in the impending election. It cannot be denied that most of the political parties over the years have failed to democratise themselves, implement pledges of greater autonomy to provinces and work for more participatory systems at the local level, yet their presence in the polity remains beyond question. 19 The public needs a platform to rally around, and political parties offer that platform. But the parties, no doubt, should be subject to some sort of scrutiny to make them more democratic.

The election plan in Pakistan excludes minorities from directly electing or contesting the election, whereby, it would be impossible for the authorities to bar religious parties, some of them not advocates of democracy, from contesting elections. In fact, by going for the sort of separate electorate, the government itself has flouted its commitment to democracy and has made a mockery of the very idea of allowing "citizens of Pakistan" a share in decision-making. 20

If the first phase of the local body elections indicates the future of elections in Pakistan, then it is obvious that a majority of the district nazims and naib nazims will come only from the traditional political groups.

Islamic Groups

Another factor which is resulting in unrest in Pakistan is the fact that Islamic fundamentalist parties are jockeying for position. The most powerful of them, the Jamaat-i-Islami, staged protests across Pakistan on December 17, 2000, demanding Musharraf's resignation. Jamaat chief Qazi Hussain Ahmad urged other generals to replace Musharraf, telling reporters that Musharraf had "failed on all fronts" and "jeopardized the country's security and honour". 21

The Lashkar-e-Tayyaba, the largest Pakistani jehadi 22 group, fighting in the disputed territory of Kashmir, has promised to sabotage recent peace moves between India and Pakistan and has even told Musharraf to grow an Islamic beard. 23

Though Islamabad is making efforts to block the creation of a united Islamic front, the Islamic parties have supporters in the army and military intelligence services who are working to subvert this. They are also encouraged by some of the generals who are keen that Musharraf should choose Islam over democracy. Thus, the military regime's political efforts are facing a number of restrictions in the country.

Developments on the Economic Front

Pakistan is in the throes of a major economic crisis. Constant borrowing by one government after another has left the nation facing a debt of approximately US$38 billion. 24 Its military government has been struggling to service this debt and has been on the verge of defaulting. Since the time it assumed power in October 1999, it has been negotiating with the International Monetary Fund (IMF) for a US$2.5 billion three-year credit which would help the country stay afloat and maintain at least a semblance of fiscal credibility.

Adding to the woes of the military regime is a marked erosion of investor confidence since it assumed power. Foreign investors wary of doing business with an army regime and impatient with its slow pace of economic reforms have gradually shied away.

IMF Package

However, Pakistan managed to temporarily avert the crisis of immediate default when the IMF approved a 10-month standby credit of US$596 million in November 2000. 25 It received US$ 192 million immediately and the rest of the bail-out package will be released in two instalments by June 2001, subject to meeting several conditions set by the IMF.

At least for now, the IMF support will be perceived within Pakistan and internationally as a vote of confidence in the economic management of the Musharraf regime. Further, and more importantly, it would help to reschedule the debt, reducing immediate risk of default.

However, Pakistan would have to adhere to several stiff conditions imposed by the IMF in order to obtain the remaining credit of US$ 404 million. The conditions include reducing the budget deficit in 2000-2001 to 5.2 per cent from 6.4 per cent in the previous year; increasing foreign exchange reserves to US$1.7 billion by June 2001 from the current level of US$1.1 billion; increasing spending on poverty in alleviation by 33 per cent; increasing utility and oil prices, 26 broadening the tax base and strengthening tax administration; speeding the process of reforms like downsizing and restructuring state corporations, banks and the bureaucracy; and working towards increasing investor confidence through several other tangible economic moves.

In a radical move, the federal Cabinet, in a meeting on February 14, 2001, chaired by General Musharraf, agreed in principal not to increase the allocation for defence in the budget for the year 2001-2002, to be announced in June 2001. 27 The freeze in the defence budget is a significant step towards the government's plan to keep non-developmental expenditure constant.

Pakistan's compliance with IMF conditions will be reviewed periodically by review missions from the IMF. Meeting these conditions will not only help in releasing the remaining standby credit, but also help to secure medium-term financial support from the IMF. Pakistan does need to recognise that these short and medium-term loans are at higher rates of interest substituting debt at much lower rates, thus, opening the country to an even worse debt crisis.

However, meeting these conditions is plummeting the Musharraf regime into another kind of crisis. The increase in oil and utility prices and increased taxation will foment increased hostility towards the military regime from the masses who are already suffering from the economic woes of the country. Further, demands from the IMF and the Western world are seriously challenging the sovereignty of the beleaguered nation.

The loan from the IMF has, no doubt, helped to avert an immediate crisis, but Pakistan needs to do some serious soul-searching to come up with a strategy to be economically independent. Borrowing to sustain the economy will always remain a double-edged sword-it will provide a short-term solution to avert economic crises, but will also plunge the country deeper into debt, thus, increasing dependence on agencies like the IMF, World Bank and Asian Development Bank and, consequently, the Western world.

Iran-Pakistan-India Gas Project

There have been months of political bickering and exhausting technical discussion and debate, on the laying down of a 2,670-km gas pipeline from Iran to Pakistan onwards to India. Pakistan stands to gain significant economic mileage from it. Pakistan would be granted an annual transit fee of US$500 million plus gas worth US$200 million for its own needs, which Iran is willing to provide on a special discount. 28 This is a welcome development for the Pakistani economy, as it reduces the country's enormous oil import bill and also makes gas available on concessional rates which works in consonance with the Pakistan government's stated policy of replacing oil with gas wherever possible.

The US$5 billion gas pipeline project has been lingering for the past several years, initially because of Pakistan's inability to take a firm political decision to allow the pipeline to India through its territory. 29 Soon after the military takeover, Pakistan conveyed its consent to the Iranian government to extend the pipeline onwards to India. But then the Indian government gave signs of disagreement, apprehending that Pakistan may cut off the supplies during any military or diplomatic tension between the two countries. Despite Pakistan's firm assurances at various levels, India was not convinced and demanded sovereign guarantees from the Iranian government. 30

According to official sources in the Ministry of Petroleum, Iran has now agreed to furnish state-to-state guarantees in favour of India. 31 But still, a debate is on in India on whether to opt for this pipeline or seek another alternative.


Even today, Pakistani society remains deeply feudal and the economy is in shambles following loan defaults and constant flight of capital. In Pakistan, no loan programme negotiated in recent years has gone beyond the first tranche, because policy and performance commitments were not met. 32 It is yet to be seen whether the current IMF loan will fare any better. The conditions imposed by the IMF are tough for Pakistan to comply with. There have been some signs of economic gains in the nation, however, lack of self-sustainability is what the Pakistan economy has to fight.

On the political front, Pakistan has taken its first step towards restoration of democracy. The long drawn out process of local government elections which commenced at the end of 2000, is scheduled to be completed by the middle of the present year. The first phase of the regime's devolution exercise projects the voters' disinterest, lack of candidates and the success of the traditional political families in retaining control over the local level politics. The military regime has failed to fulfil its aim of keeping away the traditional political families from politics. Also, the local government plan seems to have failed to mobilise the general public and the Pakistan government has also not made many efforts to educate the masses about the new and complicated power devolution plan. It also seems that, without the political parties, it is unlikely that the masses will be mobilised.

Musharraf's political and economic options are to an extent restricted by fundamentalist pressures also. Economic revival and a return of democracy are threatened by growing fundamentalism and lawlessness. It, however, cannot be denied that democracy will probably surface in Pakistan, but what shade of democracy emerges remains to be seen.


Note *: Researcher Back.

Note 1: Pamela Constable, International Herald Tribune, December 12, 2000.


Note 2: Celia W. Dugger, International Herald Tribune, December 19, 2000. Back

Note 3: Ibid. Back

Note 4: Public Opinion Trends Analyses and News Service (POT) (Pakistan Series), vol XXIX, no 18, January 20, 2001, p.308. Back

Note 5: POT (Pakistan Series), vol. XXIX, no 35, February 10, 2001, p.588. Back

Note 6: Nawaz reportedly consulted King Fahd and Crown Prince Abdullah before deciding to respond to the Indian nuclear tests. He also took a Saudi prince to Kahuta. This was the first time that any foreigner had visited Pakistan's nuclear facility. Back

Note 7: n. 5, p.588. Back

Note 8: Ibid. Back

Note 9: According to sources, the USA had paid $ 25 million to the Nawaz government to help the ISI raise a commando force comprising retired army officers to capture Osama. Back

Note 10: POT (Pakistan Series), vol. XXIX, no.19, January 22, 2001, p.329. Back

Note 11: Ibid. Back

Note 12: Ahmed Rashid, "Elite's Loss, Islamist's Gain", Far Eastern Economic Review, January 11, 2001, p.24. Back

Note 13: Ibid. Back

Note 14: M. Iiyas Khan, "Traditional Winners", The Herald, February 2001,p.44b. Back

Note 15: Ibid. Back

Note 16: The candidates nominated by the local PPP leaders in the sub-divisions of Layyah, Bhera and Bhalwal and also the rural areas of Sargodha won in significant numbers. The PPP was routed in these areas in the 1997 elections, and, thus, the December 31 polls, in a way, seem to have mobilised the dormant vote bank. Back

Note 17: Azmat Abbas, "Friends in Need", The Herald, February 2001, p.45. Back

Note 18: Asian Age, February 6, 2001. Back

Note 19: POT (Pakistan Series), vol.XXIX, no. 2, January 2, 2001, p.33. Back

Note 20: Ibid. Back

Note 21: Rashid, n.12,p.25. Back

Note 22: On December 22, 2000, the Lashkar attacked New Delhi's historic Red Fort. Two Indian soldiers and a civilian guard were killed. The Lashkar has pledged next to bomb the Indian prime minister's office. Back

Note 23: Rashid, n 12, p.25. Back

Note 24: Ahmed Rashid, "Borrowed Time", Far Eastern Economic Review, December 14,2000, p.28. Back

Note 25: Ibid. Back

Note 26: Ibid. Back

Note 27: Nadeem Iqbal, "A Freeze on Defence", internet site, <http.//> Back

Note 28: Shamim Ahmed Rizvi, "$ 3b Project of Iran, Pak and India Gas Pipeline", Pakistan and Gulf Economist, December 25-31, 2000, p.39. Back

Note 29: POT (Pakistan Series), vol.XXIX, no.42, February 19,2001, p.693. Back

Note 30: Ibid. Back

Note 31: According to the new proposal, the Iranian government will give an undertaking to the Indian government that if Pakistan at any stage, in future, cuts off gas supplies to India, Tehran will provide India an equal amount of LNG at the same price. It has also been assured by Iran that it will immediately cut off gas supplies to Pakistan if Pakistan cuts gas to India. Back

Note 32: Business Standard, December 13, 2000.Back