The US State Department has clarified that Assistant Secretary Donald Lu’s upcoming appearance before a Congress panel is a routine testimony that aligns with the regular practice of US officials providing updates to Congress.
The House Subcommittee on the Middle East, Africa, and Central Asia will hold a hearing titled “Pakistan After the Elections: Examining the Future of Democracy in Pakistan and the US-Pakistan Relationship” on March 20.
The hearing will also delve into the dynamics of US-Pakistan relations following the Feb 8 general elections.
The PTI and its leader, Imran, claim that Lu threatened to destabilise the PTI government during a March 2022 meeting with then-Pakistani ambassador in Washington, Asad Majeed Khan.
This matter is often raised during US State Department news briefings by journalists from both Pakistan and the US. The department consistentlyrefutes these allegations as baseless.
Lu, the Assistant Secretary of State for South and Central Asian Affairs, is currently the only confirmed witness for the hearing, although additional witnesses may be included.
“Any number of State Department officials testify all the time before Congress. We see it as an important part of our jobs to help Congress do its job, both from a policymaking perspective and from an oversight perspective,” said State Department Spokesperson Matthew Miller when asked about the scheduled hearing at a news briefing on Thursday.
“So we always look forward both to the informal conversations we have with Congress, the formal conversations, and of course the actual testimony that our officials provide,” he added.
When asked if the department was concerned about Lu’s safety during the hearing due to previous threats, Miller stated, “Of course, we take any threats towards US officials seriously and condemn any effort to threaten the safety and security of our diplomats.”
The spokesperson reiterated the rejection of allegations against Lu regarding the toppling of former prime minister Imran Khan, stating, “The underlying allegations against Assistant Secretary Lu, they’re false. They’ve always been false. You’ve heard me say that more than once, more than twice, more than ten times probably.”
In a statement from Houston, Texas, the PTI’s US chapter had claimed that “persistent efforts” by Pakistani Americans led to the much-anticipated announcement of a Congressional hearing on this.
This bipartisan hearing is expected to draw significant attendance from both Democratic and Republican legislators.
PTI leader Asad Qaiser on Friday said his party would “merge” with the Sunni Ittehad Council if the Election Commission of Pakistan accepted its recent intra-party polls and returned its electoral symbol of ‘bat’.
In January, after back-and-forth verdicts by the ECP and the Peshawar High Court (PHC), the PTI’s electoral symbol ultimately wasrevoked by the Supreme Court.
On March 3, the PTI conducted its intra-party elections for the third time in the past two years, following its Dec 2 elections that were earlier declared invalid.
A day ago, the Peshawar High Court upheld the Election Commission of Pakistan’s decision to reject the party allocation of reserved women and minority seats.
The dismissal of its plea challenging the ECP verdict has left the SIC — the new home of PTI-backed winning candidates — with no reserved seats. The PTI has said it would take the matter to the Supreme Court.
Speaking on DawnNewsTV show ‘Doosra Rukh’ that will be aired at 5pm today, when asked whether PTI-backed candidates who joined the SIC would remain in it, Qaiser said, “Yes, we will remain but we will also merge with it.”
He explained that if the party got back its electoral symbol after the recent intra-party polls, “both [parties] would merge” and “remain as PTI”, rather than the current scenario of its candidates being a part of the SIC.
On the matter of whether it would be allowed under the laws, he said his party was consulting legal experts.
When asked whether it was the right decision for PTI-backed candidates to join the SIC, Qaiser replied that the party held “many consultations” amongst it and that the options were few.
Speaking about the PHC verdict, the ex-NA speaker said the party’s legal team “should challenge it in the Supreme Court”.
Referring to the coalition government, he said, “A fake government cannot understand this country’s economic situation. […] They do not have the capacity, capability or even authority to make decisions. They will run away themselves.”
When asked if other parties in the current coalition government, including the Muttahida Qaumi Movement-Pakistan, would stick with the PML-N-PPP coalition, Qaiser replied: “God-willing, there would be public pressure to the extent that the mandate thieves will leave this [government].
“A new government will be formed, which will rightly comprise of those given the public mandate,” he said, adding that he saw “a change coming in four to five months”.
When asked if he thought elections would be held anew, the PTI MNA expressed hope of “getting justice” from the cases currently under way in the election appellate tribunals and other courts. “And we will get our seats back [from the courts],” he said.
On the possibility of bringing a vote of no-confidence against the current government, Qaiser said, “Definitely, when we will have the [required] numbers, there will be our representation. God-willing, Imran Khan will be the prime minister.”
The Islamabad High Court (IHC) on Friday directed the trial court to hear journalist Asad Ali Toor’s bail petition on March 16 (tomorrow) in a case about an online campaign against the judiciary.
In January, the caretaker government had formed a five-member joint investigation team (JIT) to “ascertain facts behind a malicious social media campaign” against the judiciary in the aftermath of the Supreme Court’s decision to deprive PTI of its iconic electoral symbol — the bat.
On February 23, Toor was interrogated for nearly eight hours by Federal Investigation Agency (FIA) officials on the same matter. The interrogation had taken place despite the attorney general for Pakistan assuring the apex court last month that the FIA would not take action before the general election on the notices sent to journalists.
The top court had adjourned the hearing in the case till the first week of March.
Toor was, however, arrested by the FIA on Feb 26. The next day, an Islamabad district and sessions court had granted the FIA a five-day physical remand of the journalist. On March 6, the same lower court had extended Toor’s physical remand for two days.
Eventually on March 8, the court sent the journalist to jail on a 14-day judicial remand.
According to the FIR (first information report), Toor was booked under Sections 9, 10 and 24 of the Prevention of Electronic Crimes Act (Peca), which deal with the offences of glorification of an offence, cyber terrorism and cyberstalking.
The FIR stated that Toor “built a false narrative” and publically launched a “malicious/obnoxious and explicit campaign” against “civil servants/government officials and state institutions”.
Today, a one-judge bench headed by IHC Chief Justice Aamer Farooq heard the case. The petitioner, Toor, was represented by Advocate Imaan Zainab Mazari-Hazir.
The order, a copy of which is available with Dawn.com, stated: “Keeping in view the urgency expressed by the learned counsel […], the trial court is directed to hear the bail application of the petitioner on March 16, 2024.”
According to the order, IHC CJ also directed the FIA to appear before the trial court with the relevant case record.
The order noted that the trial court adjourned the bail proceedings filed before it “without any justification or basis”. It added that the contents of the case were examined thoroughly with the petitioner’s counsel’s assistance.
“The record shows that the petitioner had moved the bail application before the trial court in which the matter […] has been adjourned for March 18, 2024,” the order stated.
In a Russia at war, there is only one real candidate and only one winner: Vladimir Putin.
As Russians cast their ballots in the March 15-17 election, the 71-year-old former KGB lieutenant colonel’s popularity is high amid strong support for the war in Ukraine.
“I support Putin and, of course, I will vote for him,” said Lyudmila Petrova, 46, who was shopping for Chinese-made counterfeit New Balance sneakers in southern Moscow at one of Russia’s largest wholesale markets.
“Putin raised Russia up from its knees. And Russia will defeat the West and Ukraine. You cannot defeat Russia — ever,” Petrova said. “Have you in the West gone completely mad? What is Ukraine to do with you?”
The West views Putin as an autocrat, a war criminal, a killer and even, as US President Joe Biden said last month, a “crazy SOB” who US officials say has enslaved Russia in a corrupt dictatorship that leads to strategic ruin.
But in Russia, the war has helped Putin tighten his grip on power and boost his popularity with Russians, according to polls and interviews with senior Russian sources.
“Don’t have any doubt: this is a job for life,” said one powerful Russian who is acquainted with thinking at the top levels of the Kremlin. He spoke to Reuters on condition of anonymity to voice his views on political issues.
“Putin has no competitors — he is at a completely different level. The West made a very serious mistake by helping to unify a large part of the Russian elite and the Russian population around Putin with its sanctions and its vilification of Russia.”
Another senior Russian source said Putin’s tenure as leader was not a question of politics but of his health which seemed robust. He has no visible successor.
Putin ordered a full-scale invasion of Ukraine in February 2022 after eight years of conflict in eastern Ukraine between Kyiv’s forces on one side and pro-Russian Ukrainians and Russian proxies on the other.
Tens of thousands of soldiers have been killed and many more wounded on both sides, thousands of Ukrainian civilians are dead and Ukraine’s economy and infrastructure have suffered damage worth hundreds of billions of dollars.
The West, which says Putin is a threat well beyond the former Soviet Union, has supplied Ukraine with hundreds of billions of dollars worth of aid, weapons and top-level intelligence.
Western leaders accuse Putin of waging a brutal imperial-style war aimed at restoring Russia’s global clout.
War with the West
Putin casts the war as part of an existential battle with a declining and decadent West which he says humiliated Russia after the Berlin Wall fell in 1989 by encroaching on what Putin considers to be Moscow’s sphere of influence, including Ukraine.
That appeals to many Russians who are suspicious about the West’s politics and intentions, if not its consumer goods.
Top Kremlin officials, some sporting sweatshirts bearing the words “Putin’s Team”, speak openly of war with NATO.
Putin’s approval rating is currently 86 per cent, up from 71pc shortly before the invasion of Ukraine, according to Levada Centre, a respected Russian pollster.
Putin’s rating also jumped during the 2008 war with Georgia and the 2014 annexation of Crimea from Ukraine.
Russian television and a sophisticated social media operation project Putin as a robust patriot and deride Western leaders such as Biden as weak, foolish and deceitful.
“For many Russians, who are partly inspired by propaganda but most importantly by their own inner convictions, Russia is in an age-old struggle with the West — and what is currently happening is an episode in this struggle,” Alexei Levinson, head of sociocultural research at Levada, told Reuters.
“Those who express such feelings in our surveys consider themselves to be participants in some way in this struggle with the West. They are like soccer fans who imagine they are participants in the soccer match.”
While some within Russia’s elite are sceptical about the prosecution of the war, they have nothing to gain and much to lose by opposing the Kremlin — as the failed mutiny of Yevgeny Prigozhin, leader of the mercenary Wagner group, showed in 2023.
Prigozhin’s plane crashed on Aug 23, two months to the day since the mutiny.
Putin is leaving little to chance. Since the full-scale invasion, authorities have cracked down on any sign of dissent. Hundreds of people have been arrested for expressing their opposition and protests are banned.
State media, which dominates Russia’s airwaves, is staunchly loyal to Putin. The task of the three rival candidates is to lose. None of their approval ratings are above 6pc.
One electoral official told Boris Nadezhdin, an anti-war candidate who was barred despite garnering tens of thousands of signatures to register, that he should focus on his own failings rather than complaining.
The Kremlin’s main concern is ensuring a high turnout. Some managers at state companies have ordered employees to vote — and submit photographs of their ballot papers, six sources told Reuters. Even cash machines remind Russians to vote.
The leaders of Russia’s fragmented opposition are either abroad, in prison, silent, or dead.
Alexei Navalny, Russia’s most prominent opposition leader, died on Feb. 16 in the “Polar Wolf” Arctic penal colony, the prison service said. His widow, Yulia, has called on Russians to turn up at polling stations at noon on March 17 to show their opposition.
Navalny had characterised Putin’s Russia as a brittle criminal state run by thieves, sycophants and spies who care only about money. He had long forecast Russia could face seismic political turmoil, including revolution.
Asked if Putin was strong or weak, Leonid Volkov, one of Navalny’s top aides said: “Dinosaurs were very strong before they were extinct.”
Shortly after speaking to Reuters in Vilnius, Volkov said he was assaulted with a hammer in an attack Lithuania blamed on Russia. The Kremlin declined to comment on the incident.
From the court, where he was sentenced last month to two and a half years in prison for “discrediting the armed forces”, veteran Russian rights activist Oleg Orlov compared Putin’s Russia to something out of a Franz Kafka or Vladimir Sorokin novel.
“Those who led our country into the pit which it is now in represent the old, the decrepit, the obsolete,” Orlov said. “They have no sense of the future only false images of the past, only mirages of ‘imperial greatness’. And they are pushing Russia backwards, back into the dystopia.”
Blood and treasure
The war has cost many thousands of Russian lives, the Russian army and security services failed to execute a short victorious war and the mobilisation of 2022 spooked sections of the population.
But Western sanctions have so far failed to sink Russia’s economy, Putin has been successful in contracting hundreds of thousands of Russian soldiers, and has tilted Russia sharply towards the superpower of China.
Russia’s war-focused economy, grew 3.6pc last year and real wages rose 7.8pc, but it faces labour shortages, investment shortages and population decline, data shows.
Putin believes he has more staying power in Ukraine than the United States and he can keep Russia in the battle for many more years, according to three Russian sources.
“War is not necessarily bad for an economy in the short term,” said one Russian source who asked not to be identified. “Putin can fight on for as long as he wants.”
The Attan dance, originating from the mountains of Afghanistan and dating back to pre-Islamic times, remains an integral part of Pakhtun culture today. It is typically performed to the beat of a dhol (drum) or other instruments such as the tabla, the 18-stringed Robab, the surnai flute (also known as the shehnai) or a wooden flute known as a Toola.
This ceremonial dance holds significance in various cultural events such as weddings, festivals, and historically, even during periods of conflict and war. Rich in cultural symbolism, Attan is often performed with handkerchiefs and swords, serving as a reminder of the performers’ glorious and victorious past.
In contrast to the more geographically bound Indian Kathak, Attan’s origins prevent it from being confined to a specific region.
The fluidity of borders, particularly between Afghanistan and Iran, as well as Khyber Pakhtunkhwa and Balochistan, has facilitated an exchange of arts and culture. These borders have acted as semi-permeable membranes where community and culture persevere through geographical and man-made boundaries, either altering or retaining art forms.
Widely recognised as a war dance, Attan has seen a major transformation under the influence of Islam. But numerous other social and geopolitical factors have also contributed to its transfiguration. Cultural renaissance, regionalisation, and the role of traditional pop culture have played a role in preserving the essence of the dance. Its evolution can be well understood through Monica Dalidowicz’s idea of ‘diaspora and tradition’, highlighting the crucial interplay between borders.
Cultural renaissance
Attan evolved in Kabul with the influence of Hindustani arts during the pre-partition times. Hindu artists were invited to perform in the court of the Amir of Afghanistan, Shir Ali Khan, during 1863-1866 and 1868-1879. These cultural connections became the primary locus for adopting influences from outside.
Although many culturally rich societies strive to protect their traditions from external influence, transactions are inevitable, especially when communities regard their traditions as invaluable characteristics of their identities. They do not fear displaying them to the world and the impression these exhibitions leave results in a cultural transaction — one that has a rather invisible influence on the external culture.
Incorporating the idea of a cultural renaissance, Attan has undergone a transformation in its participants, movements and dance types. But despite its evolution, the fundamentals of Attan remain the same. Performers — anywhere between two to over 100 — dance to the beat in a circle with the rhythm gradually picking up pace.
There are multiple types of Attan, reflecting its enormous potential for exploration. These forms include Kabuli Attan, Wardaki Attan, Paktia/Khosti Attan, Kochyano/Kuchi, Khattak Dance or Warrior Dance, Waziri Attan, and Mehsud Attan.
Women perform the Kuchi Attan during events of communal or personal importance such as the coming of spring, Nowruz (the Persian new year) or childbirth. Interestingly, long-haired men also partake in Kuchi Attan.
Men in Afghanistan perform the Attan dance to the beat of drums. — photo courtesy Dance Afghanistan
The contemporary image of Pakhtuns paints them as conservative, segregated, and patriarchal in their behaviour. However, many traditions and their histories counter this image, where men and women come together to participate in dance, music, and celebration.
Afghan and Pakhtun people have actively worked to preserve their traditions through performance and art. This movement gained momentum when Pashto theatre undertook the initiative to grant women their rightful status in society and successfully achieved their goal.
Unfortunately, not all external influences have been positive, and over time patriarchal attitudes and norms have infiltrated the dance form itself, making it less open to women.
Diaspora and tradition
While Attan in Afghanistan has transformed under intercultural influences, it has also travelled across borders and continents with its people.
Dalidowicz maintains that diasporas allow people to reconstruct their traditions and recontextualise practices. Although she discusses the diaspora between West and South Asia, the literal definition of diaspora considers every displaced person from their homeland as diasporic. Hence, Afghan and Pakhtun populations, that have been displaced from their native homelands, can thus be considered diasporic.
Notably, a large Afghan community also exists in Balochistan, KP, Iran and India.
The regional variations in Attan can be traced through Afghan migrations to countries across the globe. Attan is also said to have its roots in ancient Greek theatre, with the influence purportedly carried by Alexander the Great to Afghanistan and Central Asia. Some scholars also claim that the term ‘Attan’ is derived from ‘Athena,’ the Greek goddess. These factors reverberate the notion that not only communities but also traditions and cultures are a consequence of diasporic movements.
Afghan artists perform the traditional Attan dance during celebrations. — Reuters
While many view Attan as the national Afghan dance, Ahmad Naser Sarmast, the founder and director of the Afghanistan National Institute of Music, disagrees: “It is difficult to claim it as a national dance because [the] structure, rhythm, accompaniments, and symbols used in [the] dance [represent] Pakhtun tribal values rather than a broader national identity.
“The idea of Attan as a national dance is, in fact, a politicised claim, referring to the past historical suppressions in Afghanistan.”
It is difficult and perhaps, incorrect to box Attan into a single category and origin given its rich history and variety. The earlier-mentioned forms of dance, for example, originate from different regions and occasions.
Fluctuating reputation
However, the Taliban invasion of Afghanistan led Attan to be labelled ‘un-Islamic’, marking a significant shift in the tradition and its essence. This era can be described as the death of the cultural renaissance that came before it. Women, previously brought to mainstream positions and circles were now banished from public participation, let alone dancing and performing Attan.
And once again, the flow of ideas, both political and cultural could not be prevented via permeable borders. The influence of religious sanctions and Talibanisation was observed throughout the Pakhtun belt of Balochistan and KP in Pakistan.
Interestingly, Attan and the perceptions around it have evolved differently in Afghanistan, Pakistan, and India. Beyond Attan, dancing itself has had a fluctuating reputation in post-partition Pakistan.
While post-partition, Pakistan’s dance was frowned upon, India’s dance was wholeheartedly celebrated as culture. In a relatively uncommon feat, women from the Pakhtun community in Swat began leading Attan in public and semi-public spaces as men dancing in public was frowned upon.
In pre-partition times, the state supported the dancers while the post-partition era and the Taliban invasion of the region (Afghanistan and parts of Balochistan) accentuated the ‘un-Islamic’ tag, segregating Attan from its inherent meaning.
Despite symbolising invaluable facets of Pakhtun society such as bravery, chivalry, honesty, and above all, togetherness, the influence of modern nation-states, borders, and religious fundamentalism restricted participation in Attan for both, men and women.
Pop culture and tradition
Despite its widespread influence, Attan receives limited coverage in mainstream media and pop culture in Pakistan.
While there may be several explanations for this, the primary one can be explained through Antonio Grmasci’s theory of ‘cultural hegemony’. Punjabi and upper-class arts and culture hold hegemonic power over that of other marginalised, groups. However, while Pakhtun cultural representation in mainstream media is negligible and oftentimes downright offensive and stereotypical, traditional folk media plays an essential role in keeping the spark alive. Because folk media is close and accessible to many communities and saturated with diverse traditional themes, it automatically grants it the power to persuade and influence.
The focus on content being of interest to the “masses”, which primarily serves the economic interests of mainstream media outlets, results in the invisibilisation of traditions such as Attan. This is also where folk media steps in and provides platforms for representation.
In recent years, however, Coke Studio has attempted to bring forward voices and artists of different communities, taking a step in the right direction for cultural representation. The mainstream music production attempted the song ‘Ya Qurban’ where artists can be seen performing Attan, a rarity for mainstream media thus far.
The absence of Attan in mainstream media is reflective of broader social issues tied to Afghan identities in their respective countries and the increasing Islamisation in Afghanistan and Pakistan.
Fascinatingly, even though the Taliban banned performing arts in the mid-1990s — which remained in place until the US invasion in 2001 — they are believed to perform the dance since it is so well-liked and uniquely Afghan. A vivid display of the paradox and hypocrisy rules out the idea that culture and tradition can be separated from human nature, granting ‘religion’ a superior position.
I use the term religion with caution because forbidding the traditional Pakhtun dance has less to do with Islam and more to do with the fundamentalism of the Taliban.
The categorisation and perception of Attan as ‘vulgar’ took place over time and was further cemented in Pakistan by Punjabi dances in films which often objectified women.
The degeneration of Attan has not only hampered its evolution but also challenged its validity. As Pakhtuns strive to preserve and represent Attan as a marker of their values over national identity, borders and national politics pose insurmountable challenges. The criminal neglect of Attan by the media needs to end to preserve this incredible indigenous tradition.
Header image: Afghan artists perform the traditional Attan dance during international Nowruz celebrations in Kabul, 2014. — Reuters/Omar Sobhani
Muhammad Aurangzeb, a former chief executive of Habib Bank Limited (HBL) with extensive experience in the financial sector, has taken the reins as Pakistan’s new finance minister.
He inherits a daunting economic landscape, grappling with intertwined issues like inflation, unemployment, and significant budget and current account deficits.
A note by Topline Securities stated that the investors were keen on seeing how he performs, as the former banker is hailed as a “solid finance guy” through and through.
Muhammad Aurangzeb is the new finance minister.
But what are the challenges he faces, in the short and long term? Dawn.com spoke to analysts to get some answers.
Negotiating with the IMF
The finance minister definitely knows his first immediate challenge. He laid out his agenda in a single sentence: to focus on the implementation of much-needed reforms and secure a new deal with the IMF.
“No debates, no waste of time — just a steadfast commitment to implementation,” he said while interacting with reporters right after being sworn in. Yesterday, in his first formal media interaction as a minister, he indicated negotiating a “longer and larger” economic bailout package with the IMF.
Khurram Husain, a business and economic journalist, says that the newly appointed finance minister will face the herculean task of “securing the last IMF tranche of the current programme as it comes to an end in April and then negotiating a new one immediately after in the coming months”.
According to macroeconomist Ammar H. Khan, the need for the IMF programme is tied to the country trying to avoid a current account crisis.
“The first challenge the finance minister would have to overcome is essentially closing the programme so the country can move towards macroeconomic stability,” he says.
Ali Farid Khwaja, chairman of KTrade Securities, notes the first short-term step the finance minister would have to take on is delivery on economic reforms to ensure the IMF’s support to avoid a sovereign default, and to ensure that the “global markets believe that he can deliver on IMF reforms”.
Amreen Soorani, head of research at JS Global, states that the new finance minister “faces two critical, interlinked tasks” which include concluding the current IMF Stand-By Arrangement (SBA) and negotiating a new, longer-term IMF program.
“Unlocking further financial assistance from the IMF would maintain Pakistan’s access to international financial markets” Soorani says, adding that a longer programme duration will “offer stability and predictability for implementing economic reforms”.
On June 29, the country got a green light from the IMF for a $3bn bailout programme, with an immediate disbursement of about $1.2bn followed by $700m in January.
The current IMF programme is expected to conclude in the second week of April, with the government readying itself for a bigger bailout in the coming months.
Debt restructuring
More critically, the new finance minister would have to work on debt restructuring — a critical step in the IMF programme as the institution conducts a Debt Sustainability Analysis (DSA) before it decides on lending to a country to ensure they are on a “sustainable development track”.
The process of debt restructuring is essentially used by a country to avoid the risk of a sovereign default on its existing debt. This can include negotiating rollovers or lower interest rates on existing loans.
According to an Atlantic Council, debt restructuring is “essentially a zero-sum game of allocating the burden among different creditor groups”.
The IMF says debt restructuring for low-income countries poses different challenges externally and domestically. Domestically, there can be “difficult trade-offs between the need to restructure sovereign debt owed to domestic banks” in addition to impact on financial growth. Externally, this will give rise to coordination challenges due to “increased diversity in the creditor composition”.
The “real big job”, according to Husain, will be managing the status quo and the “untenable debt”.
Recently, a report by Tabadlab stated that Pakistan’s debt profile is “alarming” while the country’s borrowing and spending habits are “unsustainable”, stating that the country’s total debt and liabilities — including domestic and external debt — is at a whopping Rs77.66 trillion, or $271.2bn.
The report said that since 2011, Pakistan’s external debt had nearly doubled while the domestic debt had increased six-fold, of which the country would need to pay back an estimated $49.5bn in debt maturities — 30pc of it being interest.
Another report called Pakistan’s External Debt Dilemma written by Farrukh Iqbal and Ijaz Nabi and published by the Center for Global Development concurred with the findings. It highlighted that the country’s debt servicing had been weakened by “poor export performance”, adding that the new government would have to take on the essential task of restructuring external debt.
Khurram Schehzad, chief executive of Alpha Beta Core, says that the new government will have to immediately work on debt reprofiling — another way of saying debt restructuring — “to make the country’s debt sustainable and manageable”. This includes local and foreign, with a special focus on the Chinese portion for the next three to four years.
Khwaja observes that there is a need to “strengthen communication, collaboration and trading relationships with the countries that have to roll over the bilateral loans”. These countries include China, the US, UAE and Saudi Arabia. He elaborates that a “good relationship with our creditors is needed to avoid a sovereign default”.
Managing the demands of the political leadership
In addition to juggling dealing with creditors, Aurangzeb also has to cater to the pressures of a government that is answerable to its constituents.
According to Husain, the new head faces the daunting task of managing the demands of the party in power, who would want to pander to their vote base by shoring up funds and the negative fallout of painful reforms that are necessary for steering the country out of the financial crunch.
The report by Iqbal et al observes that political, bureaucratic, and business interests “coalesce repeatedly into pro-consumption coalitions” due to which export performance — episodically improved by the depreciation brought by the IMF — cannot be sustained, which poses a challenge to real economic growth.
This quote illustrates how political will could wither away in the face of backlash that follows tough but necessary reforms.
Formalising the informal sector to increase the tax net
Fatima Attarwala, the editor of Business and Finance at Dawn, observes that the country’s informal economy is “north of $450bn and increasing”.
An informal, or shadow economy, contains a large amount of cash in circulation, with little documentation of transactions. This lack of documentation grants opportunities for illicit activities.
Dealing with the staggering amount of illicit cash present in the country is a can of worms that, according to Husain, “no finance minister previously has been able to effectively deal with”.
Attarwala states that “through the last few years of the pandemic, floods, and economic crises, more people have been pushed towards the “shadow economy”.
“The increase in cash in circulation to over Rs9tn indicates that the informal sector is increasing,” she notes, adding that despite the efforts of the State Bank of Pakistan to increase digitisation, the average value of e-commerce transactions has remained below Rs5,000 over the last five years.
The formalising of the informal sector has proved to be a “tough nut to crack” for previous governments, although this step has been noted to be the only way to significantly raise the tax net.
“The ministry would need to expand the tax net,” Ammar Khan notes, “They would have to include segments such as retail, wholesale, trade and agriculture.”
“Even with those who are included in the tax net, there is a lot of leakage that needs to be plugged,” he points out.
As far as digitisation is concerned, Khurram Husain notes that since this is something the former HBL chief executive has spoken about before, he will have to work on the digitisation of the economy and manage a largely informal sector economy to bring people into the tax net.
“He [Aurangzeb] will need to deal with people who are very stubborn and refuse to change,” Husain notes, about the reforms that are needed.
Aurangzeb had recently reiterated his desire to move towards “comprehensive” digitisation of the tax system to increase transparency and widen the tax base.
Schehzad concurs with Husain about the documentation of the informal sector through digitisation and reducing cash in circulation — a task that falls on the finance ministry.
Schehzad says that for a digital infrastructure to thrive, there is a need for “better, reliable and low-cost internet, with duties and taxes on mobile phones and other digital gadgets to be massively reduced”.
Reforms in the energy sector
Soorani notes that the “size of the [IMF] programme would directly impact the resources available to address external balance issues as our import cover is still below two months”.
She adds that it is important for the ministry to align the budget with the IMF’s recommendation to secure its approval, this will include “fiscal consolidation and structural reforms, especially in the energy sector”.
Regarding energy sector reforms, she elaborates it is pertinent to “keep the pile-up of the circular debt stock close to zero through no additional subsidy and other operational efforts on theft and inefficiencies”.
“Regular cost pass-ons and other measures” would be key in increasing energy sector efficiencies, she said.
Circular debt refers to the intricate web of liabilities in the country caused by inefficiencies and cash blockage in the energy sector.
According to the Asian Development Bank, circular debt consists of the total liability position of the power distribution companies (DISCOs) in the country to the Central Power Purchasing Authority-Guarantee (CPPA-G) which is further complicated by delayed payments by the CPPA-G to the generation companies (GENCOs).
Moreover, Schehzad notes that the energy and the finance ministries will have to work closely together to overhaul the energy sector “from single-buyer market to multi-buyer market”.
A multi-buyer market diversifies risk by reducing its dependence on a single-buyer’s ability, and it often leads to commercial attractiveness.
Furthermore, he adds that restructuring of the transmission and distribution sector, investment in alternatives (such as wind and solar) with more decentralization, lowering taxes on electricity to reign in inflation, and restructuring on Independent Power Producers (IPP) debt with the Chinese would be steps in the right direction.
Privatisation
Previously, the upcoming finance minister had talked about following through the caretakers’ policies, elaborating on the imminent privatisation of the national flag carrier, Pakistan International Airlines (PIA).
Schehzad points out that state-owned entities (SOEs) will “need to be restructured in terms of their managements and boards, where independent boards appoint competitive management to reduce losses, streamline operations and improve revenue streams”.
Mohammed Sohail, chief executive of Topline Securities, adds that the finance ministry will have to follow up the caretakers’ policies of “privatisation at a fast pace” and attract “immediate investment from our Middle Eastern friends” to tackle the economic quagmire.
Improving investor sentiment
Khwaja observes that investor sentiment often has gone under the radar of previous finance ministries, adding that “as the example of India shows, a positive investor sentiment can bring in a lot of external capital”.
He elaborates: “To improve investor sentiment, the government has to ensure that they give confidence to the public that the economy will recover.
“Economic markets tend to tighten and block the flow of money when there is a collapse in investor confidence. It leads to capital flight and also the flight of quality talent.”
Moving away from a consumption-based economy
Ammar H. Khan also asserts the need for the country to move away from a consumption-based economy and increase export-based investment.
“For that particularly, there is a need for the rupee to be undervalued — and not overvalued as it is currently,” he says.
This is reiterated by Khwaja who says that the new finance ministry will require “enhancing our exports and global trade to attract capital”.
Who is the new finance minister?
Muhammed Aurangzeb is well known in the private sector circle with over 30 years of banking experience as he served as the head for the country’s largest bank, HBL, since 2018. The bank also reported record-high earnings in 2023 of Rs114 billion.
Before taking up the role at HBL, he was also the chief executive of JP Morgan — a New York based global corporate bank.
As for his education, he did his bachelors and masters from the Wharton School of the University of Pennsylvania before kickstarting his career at Citibank and moving up the corporate ladder.
As of now, the banker has a myriad of challenges — political and economic — he would need to overcome in the coming few months, with the country’s constant balance-of-payment crisis serving as a reminder of the difficult decisions needed ahead.
An International Monetary Fund (IMF) mission is arriving in Pakistan on Wednesday for a second and last review of a $3 billion standby arrangement, two sources said.
The four-day review begins on Thursday, said the two finance ministry officials, who were speaking on condition of anonymity because they were not authorised to disclose the information.
Islamabad secured the last-gasped rescue package last summer to avert a sovereign default. The last review, if successful, will release a tranche of around $1.1bn.
Prime Minister Shehbaz Sharif has already directed his finance team, headed by newly installed Finance Minister Muhammad Aurangzeb to initiate work on seeking an Extended Fund Facility (EFF) after the standby arrangement expires on April 11.
Aurangzeb told reporters that the team was arriving this week, without mentioning a date.
The lender has said it will formulate a medium-term programme if Islamabad applies for one.
Islamabad will be “very keen to start discussions on another EFF with them during these talks,” the finance minister said, adding that further negotiations on the larger, longer programme would be taken forward on the sidelines of the IMF and World Bank’s spring meetings in April in Washington.
During the review, he said, “We would at least kick-start the process and get this going. Let’s see how they respond.”
Aurangzeb, who was picked over several other aspirants, including former four-time finance minister Ishaq Dar, has to bring stability to a country plagued by crippling boom-bust cycles that have in past led to more than 20 IMF bailout programmes.
The debt-ridden economy, which shrank -0.2 per cent last year and is expected to grow around 2pc this year, has been under extreme stress with low reserves, a balance of payment crisis, inflation at 23pc, policy interest rates at 22pc and record local currency depreciation.
