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Sharif ouster brings fresh uncertainty to Pakistan

As elections near, military returns to kingmaker role

| Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan
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A supporter of Pakistan's Prime Minister Nawaz Sharif passes out after the Supreme Court's decision to disqualify Sharif.   © Reuters

Pakistan's three-time Prime Minister Nawaz Sharif has been removed from office for a fourth time -- a fate all too common for civilian leaders in a country that has been ruled by the military for almost half of its 70-year existence.

Sharif was evicted from office on July 26 -- not by soldiers in khaki uniforms but by judges in black robes. After a lengthy investigation, triggered by disclosures of the offshore accounts of Sharif's children in the Panama Papers, a mass of legal documents leaked on the internet last year, the Supreme Court disqualified him from office on the basis of obscure clauses of the Pakistani constitution that requires holders of public office to be "honest" and "trustworthy." The former prime minister's offense: failing to declare income, albeit uncollected, from his chairmanship of a company used as a vehicle to obtain residency in the United Arab Emirates.

Sharif will be succeeded by his younger brother, Shahbaz, with the petroleum and gas minister, Shahid Khaqan Abbasi, serving as a stop-gap prime minister. With general elections nearly a year away, Pakistan was already in a period of transition. But the disqualification of the prime minister adds to the country's wider uncertainty.

Maintaining party unity

Like their counterparts in Bangladesh and India, Pakistani political parties are largely family enterprises or have strong dynastic features. Hence it is no surprise that Shahbaz Sharif will succeed his brother. Shahbaz presently serves as chief minister of Punjab, Pakistan's largest state -- a position that will likely be filled by his own son, Hamza.

The army, it is believed, views Shahbaz as a man it can deal with. He, along with Chaudhry Nisar Ali Khan, the country's interior minister, have been the party's main interlocutors with the army during a number of crises over the past decade. If the army and courts give Shahbaz space to govern, we may see new life injected into the current government and ruling Pakistan Muslim League (PML-N) -- - Sharif's party. His brother, meanwhile, as Punjab's chief minister, has developed a reputation for being a fierce administrator -- a doer more than a talker who has pushed forward mass transit projects and reforms in education and policing.

However, an expansive investigation by Pakistan's federal anti-corruption body, the National Accountability Bureau, could eventually knock Shahbaz out of the political process as well. Some observers in Pakistan suspect that the army could support Nisar Ali Khan in leading a PML-N splinter group to wrest the party from the hands of the Sharifs. Adding to the uncertainty, the Supreme Court has not explicitly stated for how long Nawaz is disqualified -- whether it is merely for a five-year period or permanently.

Teetering economy

Pakistan's economy has stabilized under Nawaz, avoiding a default in 2013 through an International Monetary Fund program it successfully completed last year despite falling short on some key reforms, such as widening the tax net. The government has so far attracted more than $56 billion in investment from Beijing as part of the China-Pakistan Economic Corridor. The World Bank has forecast annual growth in the country's gross domestic product to reach 5.2% this year and 5.8% in 2019.

Other indicators however give greater cause for concern. First, a struggling export sector has added stress on the current account deficit. Second, annual economic growth remains below the 7% threshold widely regarded as necessary to provide jobs for new entrants into the labor force. Third, Islamabad may soon face rising debt repayment obligations and power sector dues. And finally, external debt has risen by 30% in Pakistan under the present government as it ramps up installed electric power generation, mainly through private sector investment backed by sovereign guarantees.

To a large extent, these challenges are attributable to the economic policies of Ishaq Dar, the country's finance minister, who was also disqualified from office along with Nawaz. The macroeconomic stability that Dar is credited with is highly leveraged, built on foreign borrowings. In addition, Dar has kept the Pakistani rupee artificially overvalued, hampering the competitiveness of Pakistani exports, and held on to rebates owed to textile industry exporters, denying them working capital.

With the departure of Dar, it is unclear who will steer Pakistan's economy. For Shahbaz, however, the minister's departure is an opportunity to move away from his legacy and pursue export-friendly policies in the government's final year. Such policies and the gradual depreciation of the rupee could boost exports while managing inflationary pressures in Pakistan.

Shahbaz has emphasized infrastructure development and service delivery in Punjab, but the province has lagged in job creation under his rule. If Shahbaz can stay on the good side of the army and the courts, he will have a brief window before next year's elections to show an alternative model of economic growth to the electorate -- one that is export-driven and emphasizes job creation.

Regional conflict

The departure of Nawaz comes as regional conflict escalates amid rising geopolitical instability in the wake of American decline. As the Taliban in Afghanistan presses its claims in Pakistan's backyard and Afghan security forces suffer massive casualties, the Trump administration has dithered on its regional strategy. At the same time, Indian foreign policy toward Pakistan's involvement in Kashmir has become increasingly assertive.

Nawaz Sharif set out to normalize ties with India, but he moved at too fast a pace for Pakistan's military, which sees India as a strategic, if not existential threat. Over the course of Nawaz's most recent tenure as prime minister, the army gradually developed a monopoly over foreign and national security policy, especially concerning relations with Afghanistan and India. As a result, the departure of Nawaz portends little change in how Pakistan deals with the region.

Pakistan's democracy remains in a hybrid state -- neither fully democratic, nor fully autocratic. In practice, the army wields power far beyond its constitutional mandate. But Pakistan's democratic parties are also barriers to a real democracy, instead acting as personal fiefdoms of the country's civilian elite. None of the major parties have credible internal elections, and elected governments, whether at the center or in the provinces, resist devolving power to local bodies, stunting evolution of the country's system of governance.

Like many countries in the developing world, Pakistan has yet to consolidate its path toward democracy and prosperity. It is a non-linear path that has been marked by reversals. But the country's vibrant media and its young, politically savvy population, suggest that after 70 years, it is far too premature to write off Pakistan's democracy. The mountaintop may be far, but at least it can be seen.

Arif Rafiq is president of Vizier Consulting, a political risk advisory company, a fellow at the U.S.-based Center for Global Policy, and non-resident fellow at the Middle East Institute in Washington, D.C.

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