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Politics of economic crisis in Pakistan: Civil-Military relations

Published : Friday, 14 April, 2023 at 12:00 AM  Count : 578
Golam Rasul
Pakistan is currently facing one of its worst economic crises. The country's foreign exchange reserves have fallen to about USD 3 billion, which can cover less than a month's worth of imports. Because of the shortage of foreign currency, the government is compelled to reduce the opening of Letters of Credit, which has led to soaring the price of essential goods. The Pakistani Rupee fell more than 35% over the past year and inflations reached to 35year's high. The general people are struggling to survive.

In its efforts to find a way out of the crisis, the government has been negotiating with the IMF for couple of months, but as yet without an agreement. If an IMF loan is not approved quickly, the country's economy may face serious consequences, including default on foreign loans. This is not, however, the first time that the country has experienced an economic crisis. Since independence in 1947, the country has gone through various economic crises and continually sought assistance from the IMF and other bilateral and multilateral donors. It has already received its' 13th bailout from the IMF. Despite various economic reforms and aid packages from international organizations, the country continues to face recurrent crises. Almost all the government in Pakistan either military or civil have been faced this challenge and transferred to next government.   

To find a long-term solution to these recurrent crises, it is first necessary to understand the underlying causes. Although there are several reasons for Pakistan's frequent economic crises, we must first understand the country's politics, particularly the civil-military relations as politics and economics are linked closely and influence each other.

After the demise of Muhammed Ali Jinnah and Liaquat Ali Khan, civil and military bureaucrats consolidated their power and have played a pivotal role in national politics ever since. The military has ruled the country over 30 years of its 75-year history. Successive military rulers expanded the military's influence in government, economy, and society in a variety of ways. The military officers were given important  positions in civil departments, public enterprises, and law enforcement agencies. In search of legitimacy, the military rulers used financial incentives and dubious developmental spending to appease the country's other influential classes. This planted the seeds of corruption and established a process and mechanisms for allocating scarce resources in inefficient manner, which created long-term economic distortions and inefficiency. The civilian governments have also followed the footsteps of military rulers. As a result, corruption and poor economic management practices had become the norm and economic mismanagement and inefficiency continues today.  

The dominance of the military has marginalized political institutions and civil bureaucrats in the decision-making process. Moreover, realizing the superior rule of military, the civil bureaucracy established a friendly relationship with the military establishment and the civil bureaucracy becomes subservient to the military establishment. This has further limited the ability of the civil administration to make economic decisions based on following sound economic principles and evaluating the costs and benefits of allocating scarce economic resources as well as well-being of the majority of the people. Moreover, political patronage and corruption have affected the functioning and effectiveness of public institutions as the distribution of public resources frequently influenced by political rather than economic rationale. As a result, the country has been unable to develop a healthy political system and strengthen democratic institutions. Weak democratic and economic institutions, combined with frequent political and social unrest, have badly affected economic performance.

Unhealthy and unbalanced civil-military relationships, and their mutual interactions, alliances and power-sharing mechanisms, have produced several contradictions and conflicts in Pakistan's politics and economics. Influential families and their allies have always dominated political parties. The elite holds strategic positions in the bureaucratic, civil, political, military, and economic decision-making structures, and controls the country's economic, military, and political institutions.

Muhammad Ali Jinnah, in his Presidential Address to the Constituent Assembly of Pakistan on August 11, 1947, stated, "If we want to make this great state of Pakistan happy and prosperous, we should wholly and solely concentrate on the well-being of the people, especially the masses and the poor." The irony is that shortly after independence; the elites - civil, military, political, business, and landlords - captured the state of Pakistan and forgot the masses and the poor.

The elite capture has led to a fundamental political contradiction in Pakistan. In politics, the richest represent the poorest; the industrialists represent the labour class; and the feudal class represents the peasants. These contradictory political realities have heavily influenced economic decision-making. The state has given priority to the interests of the influential political groups, the military establishment, the industrialists, and the landed elites and ignored fundamental economic and social issues such as land reform, poverty, inequality, health, education, and nutrition.

Priority was given to modernizing the army and building large infrastructure. About one-third of the government budget goes to the military, civil administration, and pensions, and only limited resources are available for development expenditure. Apart from their huge political power, the military has also gained significant corporate business interests over the years. The military owns hospitals, medical colleges, agricultural lands, fertilizer factories, transportation companies, construction companies, housing projects and universities. According to the book "Inside Pakistan's Military Economy" by Ayesha Siddiqa, the military now controls approximately 23% of corporate sector assets in the country. Two military foundations - the Fauji Foundation and Army Welfare Trust - represent two of the country's largest conglomerates.  

The elite capture and military dominance have led to a plethora of contradictions in Pakistan's economy. While it produces sophisticated nuclear weapons and missiles, it fails to provide adequate food and nutrition to the majority of the population. This contradiction is reflected in the economy and society in various ways. For instance, while over a quarter of Pakistanis are struggling to survive and are standing in long queues for cheap food, another class waits in long lines for an expensive cup of coffee from a Canadian coffee shop.

To avert recurrent future economic crises and make the country prosperous, massive political and economic reforms will be required based on fundamental economic principles and democratic culture and norms.  The elite culture in politics and economics needs to be eliminated and democratic institutions be strengthened. To improve economic management, economic governance and resource allocation must be improved, corruption must be curbed, and accountability and transparency must be ensured. Along with major economic reforms, major political reforms will also be necessary focusing on the well-being of the general people. Finally, the civil and military establishments should develop a balanced and healthy relationship following democratic principles and norms.

The writer is a professor at the Department of Economics, International University of Business Agriculture and Technology in Dhaka, Bangladesh



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