Pakistan’s recent election brought a new government under 25^th Prime Minister Mian Shehbaz Sharif. While leadership may have changed, the challenges remain. The incoming government faces daunting task of tackling complex political and economic issues that have plagued Pakistan for years. Amidst the soaring inflation and a divided parliament, the new leadership must act swiftly to stabilise the economy and foster political cooperation, using an innovative approach.

At the political front, the new government is facing allegations of rigging and mandate theft due to the untransparent polling process. Some US Lawmakers have urged Biden administration to probe Pakistan elections and to refrain from recognising the new government. Global media outlets such as Al-Jazeera, The Economist and The Guardian have amplified these claims, intensifying pressure and casting doubt on the legitimacy and strength of the new Pakistani coalition government.

As the current $3 billion IMF program approaches its expiration in April 2024, securing new IMF payouts becomes imperative for Pakistan to address its debt repayments. Economist Hafeez Pasha emphasizes that Pakistan faces the formidable challenge of repaying $35 billion to creditors within three years. Consequently, future IMF packages, expected to be under $10 billion are primarily earmarked for debt repayments rather than new developmental projects. These loans are critical for stabilising Pakistan’s economy and averting the worst-case scenario of default.

To prevent a deeper economic crisis, the new government must comply with IMF conditions. These measures will likely lead to an increase in energy and fuel prices, exacerbating inflation for the common population. The PSX corporate profitability has remained resilient, despite a sharp depreciation in the rupee. The annual growth in both rupee and dollar terms has been consistent. Investors have perceived no significant impact on the earnings profile so far.

In terms of clarity, investors are eagerly awaiting an economic plan from the new government. The business community seeks fundamental improvements and envisages Pakistan transitioning from a consumption-driven economy to one led by production and formalisation. Moreover, frequent internet bans pose challenges for international businesses and hinder the growth of the digital economy. Recent reports indicate a staggering 6000% surge in VPN usage in Pakistan, reflecting the impact of these bans on businesses.

The latest government encounters a substantial obstacle presented by the strong opposition of Pakistan Tehreek-e-Insaf (PTI). Tensions with the opposition, fuelled by political demonstrations, due to targeted state oppression against PTI threaten to disrupt progress. The opposition’s grievances could impede collaboration and economic decision-making, potentially causing legislative hiccups. The PTI’s role as either a constructive or disruptive opposition will significantly influence Pakistani politics.

The government primarily generates revenue through exports, investments, and foreign remittances. The sharp decline in remittances after 2021 also marked a stark contrast. These fluctuations underscore a notable erosion of trust among the Pakistani diaspora abroad, which is a crucial national asset. The challenge for the post-election government lies in restoring this trust, particularly considering the substantial support enjoyed by Imran Khan from overseas Pakistanis.

The overall geo-political tensions, escalating hostility in the Middle East, the Russia-Ukraine war, TTP resurgence in Afghanistan and the upcoming US presidential elections demand strong governance that is intact both domestically and diplomatically. These challenges, coupled with potential supply chain disruptions, may heighten inflationary pressures, leading to public unrest and populist policymaking that could delay some structural reforms. The success of the new government in addressing the needs of the Pakistani people hinges on its ability to navigate these challenges effectively.

The resurgence of terrorism in Balochistan, Khyber Pakhtunkhwa (KPK), Gilgit-Baltistan, and the Tribal areas poses a significant internal threat. This not only jeopardises public safety but also discourages and disrupts foreign investment. Vulnerable borders remain a sensitive issue for the new government. Moreover, natural calamities like floods driven by climate change are a grave concern, especially following the widespread devastation in 2022 and the current torrential rains. The government must be prepared to mitigate these risks and prevent potential catastrophes.

Pakistan’s journey towards prosperity is now critically dependent on the new government’s ability to rebuild trust with its citizens and foster positive public sentiment, thereby ensuring political stability. Macroeconomic stability through effective enforcement of policies is crucial. Additionally, addressing the energy crisis to enable affordable manufacturing and creating a business-friendly environment is essential for stimulating production, growth and exports while enhancing investor confidence. The government has the opportunity to lay the groundwork for a stable and prosperous Pakistan by prioritising these goals and taking decisive action.