Edge of an abyss

Pakistan is facing the worst crisis since the country’s formation in 1947. It is simultaneously facing major challenges on three fronts: economic, environmental, and political. The country has seen seven finance ministers since 2018. In the last 10 months since the Shehbaz Sharif government has come to power replacing Imran Khan, Pakistan has already seen two finance ministers. The country has recorded a new high in inflation as it went to 41.54 per cent on a year-on-year basis for the week ended on February 23. Though in the current fiscal year, the real GDP growth is projected at 1.5 per cent, the present trend indicates that the economy might contract in 2023. Pakistani industry is struggling due to the 2022 floods and delays in the opening of letters of credit. The industrial sector is anticipating huge job cuts and a sharp decline in production. More than a million informal workers in the textile sector are likely to be impacted.

Economic challenges

Pakistan’s present economic struggles have continued for over three years. It started with the sudden suspension of the IMF’s bailout package in 2020, losses from floods in June 2022, and political mismanagement leading to an economic crisis in 2022. In 2019, Pakistan secured a USD 6.5 billion IMF bailout which topped up with another USD 1 billion last year. In February 2023, IMF’s 9th review meeting with Pakistan was held to clear IMF’s Extended Fund Facility, aimed at helping countries facing balance-of-payments crises. Reacting to the stringent conditions imposed by the IMF, Pakistan Prime Minister Shehbaz Sharif said the International Monetary Fund was giving his country a tough time over unlocking stalled funding from a USD 6.5 billion bailout, at a time of “unimaginable” economic crisis. Pakistan has taken 14 loans from the IMF. But none of them has ever been completed. Questions are being asked about the capacity and capability of the Pakistani state to get out of this dead-end.

Pakistan relies heavily on imported food and energy. As commodity prices have soared, its current-account balance has widened and hard currency has drained away. Its currency, the rupee, has lost 24 per cent of its value against the dollar in 2022. The decline continues. In January this year, Pakistan’s central bank reserves declined to USD 3.09 billion, the lowest since 1998 and not enough to cover the cost of three weeks of imports. According to the Pakistan Bureau of Statistics (PBS), bananas, chicken, sugar, cooking oil, gas, and cigarettes have also become costlier. Short-term inflation, measured by Sensitive Price Indicator (SPI), jumped to 41.54 per cent on a year-on-year basis for the week ended on Feb 23, rising from 38.42 per cent in the previous week, the report said.

Environmental challenges

Pakistan’s climate challenges pose a national security emergency. The devastating 2022 floods have exposed Pakistan and the Indus Basin to the frontline of climate change, biodiversity loss, pollution, and waste crisis.

It is reported that for the past 20 years, Pakistan has consistently ranked among the top 10 most vulnerable countries on the Climate Risk Index, with 10,000 fatalities due to climate-related disasters and financial losses amounting to about USD 4 billion from 173 extreme weather events. These challenges threaten to spark climate-related conflict over resources — such as water — that have become scarce due to climate change impacts. Climate-related disasters like floods, heat waves or tsunamis can also exacerbate tensions among groups who already have a history of conflict.

Political challenges

Pakistan was part of British India till 1947 when the British Parliament passed the Indian Independence Act on July 18 and created two dominions, Pakistan and Indian Union. Pakistan, which came into existence on August 14, 1947, after the partition of the Indian states of Punjab and Bengal, has failed to establish itself as a nation-state even after 75 years of its independence. It is feared that Pakistan’s worsening economic crisis can lead to its balkanization; which leads to the fragmentation of larger regions or states into smaller regions or states.

In June 2022, following his removal from power, Imran Khan, the former Prime Minister of Pakistan, warned of a turbulent future for Pakistan, talking about a breakup of the country into three parts. “If the right decision is not taken, Pakistan will lose its nuclear deterrence ... and then it will be fragmented into three pieces”, Imran cautioned

Pakistan comprises four provinces, one federal territory, and two disputed territories. For years, there have been strong separatist or anti-Islamabad movements in the provinces of Balochistan and Khyber-Pakhtunkhwa. These areas are dominated by Pashtun and Balochi ethnic people. This ethnic identity has heavily influenced the politics and militancy of the region. The Islamabad capital region and the central region- which is divided between Punjab and Sindh Provinces, is the third vulnerable region of Pakistan.

Balochistan province has seen some form of armed insurgency against the Islamabad government since 1948. Pakistan’s second most vulnerable region, Khyber-Pakhtunkhwa, has had its separatism and militancy issues. It is the Pashtun-dominated province of Pakistan, an ethnicity that also dominates most of Afghanistan.

Political analysts argue that a likely path to balkanization can be due to more political instability in the central regions of Pakistan (i.e. Punjab and Sindh), resulting in them losing political control over the outer regions, especially if Iran and Afghanistan sense weakness and act on it. Losing the two regions would lead to Pakistan becoming even more unstable. Pakistan also has de facto control over two areas that it considers its territories but is disputed and claimed by India as its land. These are Gilgit-Baltistan and Azad Kashmir, which India considers Pakistan-occupied Kashmir (PoK). Balkanization may happen along these provincial lines.

Who will bail out Pakistan?

Pakistan has unwillingly accepted the strict conditions of a deal with the IMF, to provide a lifeline for an economy in turmoil. Pakistan has already taken a string of measures, which included adopting a market-based exchange rate; a hike in fuel and power tariffs; the withdrawal of subsidies, and more taxation to generate revenue to bridge the fiscal deficit.

Pakistan, historically a close ally of Washington, has become increasingly close to China, which has provided billions in loans and is Islamabad’s largest single creditor. China and Iran have come to Pakistan’s rescue amid the economic crisis as the IMF delays the next loan tranche. China has extended a new USD 700 million loan made through the state-owned China Development Bank to boost the country’s foreign exchange reserves by about 20 per cent. Currently, China is the largest creditor of Pakistan, with its commercial banks holding approximately 30 per cent of Pakistan’s external debt. In addition to this loan, Pakistan is also looking to refinance two more commercial loans worth USD 500 million and USD 800 million. In total, Pakistan is aiming to refinance Chinese loans up to USD 2 billion by the end of February or the first week of March 2023.

Iran has established six border markets to promote trade with Pakistan. During the last 10 months, the volume of bilateral trade between the two countries has reached USD 2 billion, and the target has been set to reach USD 5 billion. After China and Iran, Uzbekistan has also inked a USD 1 billion deal to increase bilateral trade with Pakistan.

Quite expectedly, the US has expressed its deep concern that the loans being given by China to Pakistan and Sri Lanka may be used for coercive leverage, Donald Lu, Assistant Secretary of State for South and Central Asia, said ahead of Secretary of State Antony Blinken’s three-day visit to India. “We are talking to India, talking to countries of the region about how we help countries to make their own decisions and not decisions that might be compelled by any outside partner, including China,” Lu said.

Major blow to the Two-Nation Theory

The foundation of Pakistan was built on the Two-Nation Theory authored, as early as 1887, by Sir Sayed Ahmad Khan of Aligarh University. He declared, in a public meeting in Lucknow, that Hindus and Muslims ought to belong to two different nations. He again addressed the people, on the subject of a separate nation, at Meerut in March 1888. Syed Ameer Ali of Calcutta, the first Indian High Court judge, was the next sponsor of this two-nation theory. And in 1933, Chaudhry Rehmat Ali, a scholar at the University of Cambridge, coined the word Pakistan. Subsequently; Mohammed Ali Jinnah detailed the theory at length while sponsoring the Pakistan Resolution, in March 1940, at the Lahore session of the Muslim League. Muslims were not a minority, Muslims were a nation and they must have their homeland, their territory, and their state, Jinnah demanded.

Failure of Pakistan to establish itself as a credible nation-state flags the limitations of the Two-Nation Theory on which this subcontinent was divided in 1947. Though the onus of partition is generally put on the Two-Nation Theory and Jinnah’s Pakistan resolution in Lahore, a few prominent Hindu leaders also propagated the same theory.

It is alleged that Veer Savarkar in his presidential address at the All India Hindu Mahasabha convention in Ahmedabad in 1937 had said, “India cannot be assumed today to be a Unitarian and homogeneous nation, but on the contrary, there are two nations in the main; the Hindus and the Moslems, in India.”

Negating this allegation, his followers argue that as per Savarkar’s Two Nation Theory, though there are two nations in India, India shall not be divided into two parts, one for Muslims and the other for the Hindus; that the two nations shall dwell in one country and shall live under the mantle of one single constitution.

Quite some time before the Muslim League demanded the partition of India in 1940, on a religious basis, G.D. Birla had pleaded for it. On January 11, 1938, he wrote to Mahadev Desai, Gandhi’s secretary: “I wonder why it should not be possible to have two Federations, one of Muslims and another of Hindus. The Muslim Federation may be composed of all the provinces or portions of the provinces which contain more than two-thirds Muslim population and the Indian states like Kashmir … if anything is going to check our progress, it is the Hindu-Muslim question – not the Englishman, but our internal quarrels.” Not only did Birla try to persuade Gandhi to agree to the partition of India on communal lines as early as January 1938 but he also approached Viceroy Linlithgow with the same proposal in the same month. Later, GD Birla, who had been putting pressure on Gandhi to agree to the partition of India on a religious basis and consequent mutilation of Bengal and Punjab, wrote in his memoir, ‘In the Shadow of the Mahatma’, “I somehow or other not only believed in the inevitability of Partition but always considered this as a good way out of our difficulties”, writes, Suniti K Ghosh (1996).

The first major blow to the Two-Nation Theory occurred in 1971 when East Pakistan declared independence from Pakistan and created a new country in Bangladesh. The basis of separation between East and West Pakistan — both Muslim-dominated regions, were differences in language and culture, not religion. The independent state of Bangladesh was created to proclaim the linguistic identity of the people. Thus, Balkanization of Pakistan began within 24 years of its formation. Since then the crisis has extended to other regions.

During the last 50 years, Bangladesh, one of the most densely populated countries of the world with a population density of 1,147 persons per square km, has outperformed Pakistan (with a population density of 290 persons per km) in almost all major socio-economic parameters. For example, 2021 data shows, that year, the average income of a Bangladeshi was USD 2,570 compared to USD 1,47 earned by a Pakistani citizen. And the ‘life expectancy’ of a male Bangladeshi was 70 years compared to 64 years for a Pakistani male. For females, the corresponding ages were 74 and 69 years. On a scale of 100, the score for the ‘political stability’ of Bangladesh was 46 compared to only 29 for Pakistan and on the same scale, the corresponding score for ‘health’ was 42 and 29 respectively. In the case of the Human Development Index (HDI), Bangladesh’s rank (129) is far ahead of India (132) and Pakistan (161).

Conclusion

To the Pakistani and Indian supporters of the Two Nation Theory, the present crisis in Pakistan is a major ideological challenge. The Balkanization of Pakistan will put the last nail in the coffin of the Two Nation Theory. Additionally, a fragmented and politically unstable Pakistan will pose a serious security threat to India.

In January, Pakistan’s Prime Minister Shehbaz Sharif called for peace talks with India. Commenting on this, Khurshid Kasuri, the ex-foreign minister of Pakistan said, ‘Indian Prime Minister Modi bears the greater responsibility in promoting regional peace since he is currently the master of everything in India which includes politics, the media, the judiciary, and the economy. That’s not the case in Pakistan where Pakistan PMs have to keep on juggling the ball to satisfy the conflicting constituencies. The greater responsibility thus falls on Prime Minister Modi to make efforts for peace in South Asia and to encourage regional cooperation with all countries, including Pakistan’. In this context, the recent comment of the former Research and Analysis Wing (RAW) chief Amarjit Singh Dulat, on a possible engagement between India and Pakistan, demands proper attention. In an interview with Business Today, he said that Indian PM Narendra Modi may at some stage bail out Pakistan from the economic crisis it is facing right now.

Furthermore, India cannot ignore the emerging formidable axis between Iran, Russia, Pakistan, and China. The new Eurasian alignment around Shanghai Cooperation Organization (SCO), where both India and Pakistan are also members, may decide the future of this subcontinent.

Views expressed are personal