Archives

March 6, 2015

Date: March 20, 2015

A Friday rundown of Pakistan’s top policy headlines on JI’s radar this week

A Leap for Indo-Pak Ties

Indian Foreign Secretary S. Jaishankar’s maiden visit to Islamabad this week has rekindled discussions on the state of the India-Pakistan relationship. Stagnant since January 2013 when talks were last called off, the bilateral equation has been characterized by tension and unpredictability, leading to roadblocks that include the near-defunct 2003 ceasefire on the Line of Control (LoC), and the seasonal jingoism of electioneering political leaders. The need for dialogue between the two countries is acute, especially in the face of emerging regional challenges. And while the new Indian Foreign Secretary’s visit has been carefully couched by New Delhi in SAARC language, observers on both sides of the border agree that in Pakistan lies a rising India’s biggest regional foreign policy test, given both history and the risk of escalation between the two nuclear-armed neighbours. 

There were no surprises when the two Foreign Secretaries, who met in a cordial atmosphere, stuck close to their official scripts. A slew of new CBMs including for the LoC were discussed, and following up on these will be key if the Indo-Pak relationship is to be given a reset. But the road ahead won’t be an easy one, and pragmatism and political will be key in keeping ties afloat. Reactivating the backchannel is one possible move that can help revitalize the dialogue, and allow for the more serious issues on the table – Kashmir and terrorism – to be discussed away from the frenzy of the media spotlight. But the important thing is to keep talking. While it may have been a short flight for Mr. Jaishankar, the visit has certainly been a welcome, albeit cautious, leap for the moribund bilateral relationship. 

FATA Senate Elections Suspended

Controversy surrounding Senate elections gained impetus just a day before legislatures were to go to polls when the government issued a hastily drafted Presidential Ordinance barring Federally Administered Tribal Areas (FATA) parliamentarians from exercising their right to cast four votes each. The new ordinance, issued after midnight just a day before the elections, restricts FATA parliamentarians to a single vote instead of the four they were granted under a similar ordinance promulgated by former president Pervaiz Musharraf in 2002. 

The timing of the ordinance, at the heels of horse trading allegations, and reports that a majority group of FATA parliamentarians had finalized the list of four aspirants for senatorial slots, threatening the PML-N government’s calculations of its strength in Senate, raised new questions on the arbitrary use of an ordinance for political jockeying. Taking exception to the sudden reversal of electoral procedure, FATA parliamentarians filed a writ petition against the ordinance in the apex court, suspending the election of four FATA senators. 

With the successful, albeit controversial, completion of Senate elections in other parts of the country, important questions remain on the way forward for electoral reforms. The recent hype surrounding polls for the upper house of Parliament, which follows a three month protest against rigging allegations in the May 2013 election, has brought in to focus the need to implement comprehensive electoral reforms in consultation with all political parties. Selective application of changes in election procedures and the lack of progress on reform under the National Assembly’s committee on electoral reform will continue to haunt the democratic process in Pakistan, unless the government and opposition parties collaborate in parliament for wide ranging reforms aimed at filling the gaps in our current electoral system.  

Deflation Ahead

Backed by the slump in international oil prices and a reduction in food and transport prices, inflation in Pakistan continued its downward trajectory this month. As a measure of inflation, the Consumer Price Index has been at an 11-year low for four months in a row now, evoking fears of a deflationary trend setting in. With further easing in inflationary pressures expected over the coming months, the State Bank of Pakistan may also have to revise its annual inflation estimates downward to 3.5-4.5 percent, as against 4.5-5.5 percent earlier. 

Negative growth in the Wholesale Price Index (WPI) is also showing signs of deflation in the economy, and lower aggregate demand due to declining purchasing power will further contribute to this trend. Given that the government walks a tight rope on the budget deficit under IMF conditions, it may have little room to pursue expansionary policies in the short term to provide impetus to the economy. 

The drop in the average price level may have given some space for further reduction in interest rate to promote private sector lending. But given the pace and size of government borrowing, it has become clear that the greatest beneficiary of interest rate cuts is the government itself. The ceiling for domestic debt has already been breached for this year, essentially crowding out private sector creditofftake. This leaves one last element in the calculation of GDP – net exports. From the prevailing energy situation, there is little to suggest that industrial exports will take a significant hike over the remainder of the fiscal year. 

While prospects of deflation in the economy may be debatable, the 5 percent growth target set by the government is visibly becoming unachievable.   

Labourers take a tea break at the Islamabad-Rawalpindi metro bus construction site. 

Image Courtesy: Sara Farid

In recognition of Lahore’s rich cultural history, the Walled City Lahore Authority (WCLA) organized the Royal Trail Festival from February 20 to 22. Residents of the area where the festival was organized opened their homes to visitors, offering traditional foods and drinks. 

Incidents of religious extremism in Pakistan reported by the local media

JI’s Distinguished Speaker Series – Mr. Siddharth Varadarajan and Mr. Ashok Malik spoke on bilateral relations, India’s internal dynamics, the Foreign Secretary’s visit and US-India developments.  

Second Opinion: Gearing for a Reset 

In the wake of a tense quarter for Indo-Pak relations and continuing violence on the Line of Control (LoC), the two Foreign Secretaries finally met this week – a first since talks were suspended in January 2013. On the side-lines of the fourth Islamabad Dialogue, Jinnah Institute asked a select panel of policy experts and journalists from Pakistan and India to share their views on Indian Foreign Secretary S. Jaishankar’s visit to Islamabad on March 3, prospects for building peace and overcoming existing roadblocks in the bilateral Indo-Pak relationship.