Pakistan is roiled by multiple crises at once, with little end in sight

ISLAMABAD — Sometimes the life story of a country can be seen in days.

Take Pakistan. Last Monday, the country was plunged into darkness after the national power grid collapsed. By Thursday, the country had veered dangerously close to economic chaos.

Then, on Monday, a suicide bomber took his place among worshipers in a mosque in the northwestern city of Peshawar, and detonated around 22 pounds of explosives, bringing down the mosque wall and killing more than 100 people, many of them buried under rubble.

A nationwide power outage comes at a time of economic crisis

Pakistan is often mired in troubles. But in recent months, a storm of global troubles, from the Russian invasion of Ukraine to the Taliban's takeover of Afghanistan, has exposed and exacerbated the country's political, economic and security fault lines.

"Pakistan, simply, has run out of luck," says Yousuf Nazar, a former head of Citigroup's emerging markets investments and a political economist.

Pakistani officials tell NPR they are still investigating the cause of a nationwide power outage on Jan. 23.

In Islamabad's Aabpara market, a warren of cheap clothing shops, itinerant rat poison sellers and samosa stalls, shoppers say they'd only realized the blackout was extreme when it lasted longer than usual.

"I sat in the dark," shrugs Ali Iqbal, an editor at a local news channel. "The water was cut off, and I waited." It was only when he was able to check the news on his mobile phone, charging through a generator, that he realized it was a nationwide failure.

The power crunch came at a time when the country is also on the brink of economic chaos, with only enough foreign reserves to cover three weeks of imports.

"Pakistan has been living beyond its means and it has been piling up for debt," says Nazar. For decades, "Pakistan was able to get away with spendthrift policies."

Nazar says until recently, Pakistan's key place as a U.S. ally on the war on terror following the al-Qaida attacks of Sept. 11, 2001, and its role as a logistics conduit for U.S. and NATO forces in neighboring Afghanistan, made it easier for the country to seek help from institutions like the World Bank and International Monetary Fund.

But especially after America's withdrawal from Afghanistan and the Taliban takeover in August 2021, Islamabad has been less strategically important, he says. To make things worse, Russia's invasion of Ukraine triggered a steep rise in the price of commodities like natural gas, cooking oil and wheat. That has been a body blow to Pakistan, which is dependent on imports of food and fuel.

The economic crisis is spiraling

In November, a bailout worth around $8 billion stalled after Pakistan's finance minister, Ishaq Dar, refused to meet conditions set by the International Monetary Fund. The government was expected to stop artificially propping up the Pakistani rupee and peel back power and fuel subsidies. Dar appeared to push back against those conditions because they were politically unpopular, and his government has been trying to shore up its support ahead of elections expected this fall.

But by January, the crisis was openly spiraling.

A senior port official, speaking on condition of anonymity because of the matter's sensitivity, told NPR last week that 12,000 shipping containers filled with cargo had piled up in Pakistani ports by Jan. 23 because banks were refusing to issue letters of credit to clear their goods. Those letters effectively authorize Pakistan's state bank to forward payments in U.S. dollars.

"More than 10 million traders are on the verge of financial and economic ruin because of this," says Ajmal Baloch, president of the All Pakistan Traders Association. "Cosmetics, medical supplies, raw materials for industry and pharmaceuticals, are stuck."

Reports began emerging of workers losing their jobs and industrial units shutting down as businesses struggled to import raw materials, including a major local car manufacturer which announced it was halting work for two weeks - having neither the inventory, nor the demand.

What began as a dollar crisis "turned into a supply chain crisis, where do not have enough inputs to export – and we can't really get more dollars unless we export," says Ammar Khan, an economist and non-resident senior fellow at the Atlantic Council's South Asia Center. "A Catch-22."

"This is the worst economic crisis that Pakistan has faced in decades," says Maleeha Lodhi, a former Pakistani ambassador to the U.S. and U.N.

Fears grew that Pakistan was creeping toward default, with concerns that it could not service some of its foreign debt, says Khan. But more immediately, the risk is Pakistan will not be able to key import items it needs to keep its economy going — and its population fed.

"Pakistan doesn't have sufficient dollars to import items like fuel and edible oil," says Khan. That risks "leading to supply chain contractions, leading to economic chaos, and loss of jobs," he says, and "shortages of everything imaginable, whether energy or food."

Last Thursday, Dar began acceding to IMF demands. He removed artificial caps on the Pakistani rupee, allowing it to devalue. By Thursday evening, it lost more than 10% of its value. Dar made more moves: he raised the price of gas, and of natural gas, which many Pakistanis use for heating and cooking.

An IMF delegation arrived Tuesday. But even as Pakistani analysts welcomed the possibility of the bailout continuing — which would come with structural reforms they say are necessary — they warned of years of hardship.

"We expect inflation to be north of 30%, potentially in the hyperinflationary region," says Khan. "There will be more unemployment. The average person is not going to get any breathing room over the next few months."

In the Aabpara market, 21-year-old Nouri Wazir says if the situation gets worse, he'll have to borrow money to get by. He is paying for his computer science courses by selling pine nuts from his village. They lie in tidy packets on an upturned cardboard box. But already, Wazir says, he is skipping lunch to save money. "There's nowhere to go but minus."

A suicide bombing sparks fears of more Taliban-linked terrorism

As the IMF delegation arrived in Islamabad this week, rescue workers in Peshawar were searching for casualties from a suicide bombing in a mosque. The attack was one of Pakistan's deadliest in years.

A rogue group within the Pakistani offshoot of Afghanistan's Taliban claimed responsibility. Pakistan has accused the Afghan Taliban of harboring the group and turning a blind eye to its cross-border attacks.

But the bombing also highlighted local security failures: the attacker struck a mosque frequented by police in a heavily guarded part of Peshawar. Police told NPR that the man should have been searched at least twice before entering the mosque.

Amir Rana, the director of the Pakistan Institute for Peace Studies, says the country's powerful military is also to blame. He says the military began negotiations with the Pakistani Taliban, known by the acronym TTP, shortly after the Afghan Taliban seized power across the border.

"It was the Pakistan military [that] was directly talking with the TTP leadership," Rana says. As a goodwill measure, Rana says the army quietly allowed some militants to return to their homes in Pakistan. "I think this was the biggest mistake," he says. "And when they have infiltrated inside Pakistan, they again started the terrorist attacks."

It was ordinary Pakistanis who exposed the resettlement deal in October. They also effectively halted it by flocking to the streets in the tens of thousands to protest against it, particularly in the Swat Valley, a place the group ruled with brutal violence over a decade ago. "This terrorism — not acceptable," they shouted. "These bomb blasts — not acceptable."

One senior Pakistani official involved in talks with the TTP confirmed to NPR that some militants were allowed to return home as a goodwill gesture for talks. Muhammad Ali Saif, a former spokesman for the northwestern provincial government of Khyber Pakhtunkhwa, said these men, whom he described as "foot soldiers," were held in Pakistani detention.

The government has promised to investigate this week's suicide bombing once a mourning period for the dead is completed.

Ex-Prime Minister Imran Khan remains an unpredictable political force

Few Pakistanis expect the investigations to produce results, particularly if they are critical of the military, Pakistan's most powerful institution, and one which critics say is a key decision maker in the country's politics. That is particularly pertinent now, with general elections expected in October.

The former prime minister, Imran Khan, who was ousted in a no-confidence motion last April, plans to contest those elections.

Regardless of who wins power, economists expect the next government to go back, once again, to the IMF and request an expanded bailout — to give the government more room to spend on development, not just debt servicing.

Back in the Islamabad market, taxi driver Abdul Qadir says it won't make any difference for ordinary people like him.

"Our elites run around the world with a begging bowl, but they use it to lead a life of luxury," he shrugs. Without tackling corruption, he says, Pakistan will never change.

As he speaks, a blind man sings in praise of Sufi saints to draw attention to his plight. Shoppers thrust small currency notes in his hand. One fellow takes his arm and helps him walk down nearby stairs, helps him across the road.

It's this kind of solidarity that has helped ordinary Pakistanis survive, crisis after crisis.

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