Will Pakistan’s inflation crisis bring down Imran Khan?

Pakistani Prime Minister Imran Khan's 2018 campaign relied on a promise to make the country's economy work for the poor by ending corruption and providing employment. Four years later, inflation in Pakistan is the highest of any country in South Asia, and citizens are struggling to make ends meet as the price of essential goods rises to unprecedented heights. Meanwhile, public support for Khan is eroding: In recent weeks, the political opposition has organized protests aiming to oust the cricket star-turned-politician from power.

This week, the prime minister's outlook grew even worse. Pakistan's parliamentary opposition has called a no-confidence vote, with proceedings postponed until Monday. They have the support of a dozen defectors from Khan's own party, Pakistan Tehreek-e-Insaf (PTI), who remain dissatisfied with his economic mismanagement. The prime minister has said he will not resign, and his party called for supporters to rally in Islamabad on March 27, the day the vote was originally expected. If Khan is ousted, he would join a long list: No Pakistani prime minister has ever finished a five-year term.

Pakistan has grappled with extreme inflation for months. In January, the country's consumer price index rose to 13 percent—the highest in two years, according to the Pakistan Bureau of Statistics. The sensitive price index, which includes the prices of essential food items, was recorded at 15.1 percent last week. As a result of this inflation, so-called middle-class poverty is on the rise, squeezing the average wage earner and deteriorating standards of living. The surging prices are pushing many people to the brink.

Skyrocketing inflation has given the political opposition a window of opportunity to call for Khan's resignation. Furthermore, recent tensions with Pakistan's powerful military over the appointment of a new intelligence chief have weakened the prime minister's political position. Last month, the opposition Pakistan Peoples Party (PPP) organized a march from Karachi to Islamabad demanding his ouster, and the Pakistan Democratic Movement—an anti-PTI alliance—is planning a rally to counter the ruling party.

Murtaza Wahab, the PPP spokesperson, highlighted the government's denial of people's suffering as particularly damaging for Khan. "Despite macro[economic] factors being positive, inflation has touched a record high, taxes are increasing, the common man can't receive any benefits, and the government has no policy," he said. "We are organizing this march for the working class."

Khan acknowledged the deepening challenges in a public address this year, saying his government was making efforts to curb inflation. But the prime minister has deflected the blame for Pakistan's economic problems throughout his tenure, saying he inherited a disrupted economy from previous governments. Pakistani finance minister spokesperson Muzzammil Aslam echoed Khan in an interview with Foreign Policy, highlighting rising gas prices and the effects of the coronavirus pandemic.

Last year, Khan announced a $709 million subsidy program to mitigate the effects of inflation and help families bearing the brunt of the economic crunch. Aslam added that the government is also trying to offset inflation by raising the minimum wage. "Despite inflation, the country's economy is progressing," he said. The International Monetary Fund (IMF) has predicted some economic recovery for Pakistan this year.

But such optimism is largely confined to the ruling party's bubble. Meanwhile, experts say its efforts to help the poor—central to its 2018 elections platform—have come to a standstill. The Khan government's lip service about macroeconomic indicators doesn't offer much to alleviate the average person's suffering. Economist Kaiser Bengali said no government in Pakistan's history has managed its finances as incompetently as Khan's. The prime minister has "no clue on what to say and is in outright denial on the plight of the people," he said.

In confronting Pakistan's economic challenges, Khan has also broken other campaign promises. In 2018, he pledged not to resort to external borrowing and to end the country's cycle of debt, criticizing previous governments for relying on a "begging bowl." But Khan's government struck a deal with the IMF in May 2019: a 39-month program that demands cuts in social and development spending in exchange for a $6 billion loan. The IMF released a $1 billion tranche in February, and economists worry that increasing taxes—a condition of the loans—will trigger further price hikes.

The weight of the economic crisis is now catching up with Khan. "The country has already been bankrupt for more than two years," Bengali said. "We are a debt-ridden economy, constantly surviving on loans. There is a pattern now behind every program: We run out of money, we can't pay our loans, we go to the IMF to repay. There need to be political and structural changes so that this pattern breaks."

Of course, some of the issues are deep-rooted: Pakistan's economy is designed to serve a handful of elites, said Ammar Ali Jan, a historian and political activist. It doesn't export enough goods to make up for the luxury items it imports for the political and military elite. Despite Khan's campaign promises, this burden falls on the working class. "An ordinary wage earner is being squeezed to make an economy work that doesn't benefit them," Jan said. "Imran Khan made all kinds of promises, but the machine he assembled around himself has taken Pakistan down."

The pressure on Khan has reached new heights in the wake of Russia's invasion of Ukraine, causing a surge in global oil prices. The prime minister was quick to address the public and announce economic relief measures, including reducing gas and electricity prices through subsidies. Skeptics argue the measures are a political stunt to appease the public for short-term gains. Meanwhile, the IMF demands more austerity and spending cuts—presenting a challenge for Khan or any potential successor.

Even if Khan is ousted in the coming days, it won't resolve the crisis facing Pakistan's people. Khan's mismanagement, along with the rise in global inflation, has worsened the country's long-standing economic issues. The reliance on imports has hindered employment opportunities, and Pakistan faces a balance of payment crises. Whoever holds power in Pakistan inherits a dysfunctional economic model, and the current opposition's only apparent agenda is the removal of Khan.

Hajira Maryam is an independent journalist and recent graduate of modern South Asian studies from the University of Oxford. Her work focuses on South Asia and Turkey. Twitter: @hajiramirza

Disclaimer: This article first appeared on Foreign Policy, and is published by special syndication arrangement.