In 2020, the government of Prime Minister Imran Khan launched an economic diplomacy project titled Economic Outreach Initiative. It aims to unlock Pakistan’s growth potential and showcase national trade, tourism and foreign investment capacities through a paradigm shift of foreign policy from geopolitics to geoeconomics. The Khan administration is committed to capitalising on the ongoing strategic partnership with China and to enhancing the relationship with Washington. In parallel, Pakistan intends to strengthen connectivity with South and Central Asian countries. South Asian regional stability is the linchpin to engineering such a transition.

The United States’ disengagement with Afghanistan and the Taliban’s Kabul takeover have offered Islamabad the opportunity to become a pivotal player in the regional scenario. Islamabad’s efforts to support the Afghan peace process include consolidating solid relationships with the new rulers in Kabul and adopting a leading role in moulding the future of Afghanistan. These efforts provide impetus to galvanising Pakistan’s international legitimacy, enhancing its regional influence and fostering regional stability, allowing investments and flourishing economic relations with partner countries.

Similarly, Pakistan eased its tense relations with India and announced, together with New Delhi, a ceasefire in February 2021. In an environment where the Government is unchallenged by a political opposition mainly engaged in planning the general elections of 2023, Pakistan managed to contain the Coronavirus pandemic despite facing a resurgence of internal militancy.

Keywords – Afghanistan; COVID-19; India; Geoeconomics; Geopolitics; Taliban; USA.

1. Introduction

The Pakistan Tehreek-e-Insaf (PTI) government of Prime Minister Imran Khan has launched an economic diplomacy drive aimed to promote Pakistan internationally by exploring and showcasing its untapped potentials and establishing flourishing bilateral ties and enhanced connectivity with strategic partner countries. Peace and stability in the South Asian region are necessary preconditions to create a conducive environment for Islamabad to achieve its geoeconomic aspirations and a prominent regional role.1

The US disengagement in Afghanistan marked the winding down of Washington’s strategic partnership established with Islamabad in the wake of the 9/11 attacks and focused on counter-terrorism commitments. US President Joe Biden’s administration has not prioritised its future relations with Pakistan while it has intensified ties with India. The United States is a strategic competitor of China and works closely with allies and partners to defend its economic interests and values.2 Islamabad hopes to open a new chapter of cooperation with the United States which goes beyond security-related drives and decoupling it from Washington and Beijing’s pivots in the region.

Since 2015, Pakistan’s traditionally strong relationship with the People’s Republic of China has been further and significantly strengthened following the planning of the China-Pakistan Economic Corridor (CPEC), part of the Belt and Road Initiative.3 Beijing has also shown interest in engaging with Kabul due to the possibility of Afghanistan joining the CPEC, which would connect Pakistan to Central Asia. In addition, Islamabad has taken steps to strengthen and enhance its relationships and connectivity with South and Central Asian countries and, unexpectedly, announced a ceasefire jointly with India on 25 February 2021.

The changing circumstances in Afghanistan and the rebalancing in the South Asian regional arena have offered Pakistan an opportunity to push forward its geoeconomics agenda. Accordingly, Islamabad has promoted itself to the international community as a critical interlocutor motivated to support Afghanistan and regional stability.

Despite occasional spurts in new cases, Pakistan succeeded in containing the spread of the waves of the Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2, henceforth «COVID-19» or «Coronavirus») that hit the country from February 2020.4 Pakistan ranked first in The Economist’s Global Normalcy Index, followed by Britain, Germany and the United States. The index grades countries which are returning to their pre-pandemic levels using selected indicators.5 The World Bank and the International Monetary Fund (IMF) reported surfacing signs of national economic recovery and praised the reform agenda advanced by Pakistani authorities. However, stagnant exports and low foreign direct investments have made Pakistan dependent on external borrowings, while uncertainties on Washington’s future engagement with Pakistan could hamper Islamabad’s access to other loans.

Reinvigorated militant extremism has been recorded since the Taliban’s takeover in Afghanistan. The impact of domestic instability and deteriorating law and order situation has been significantly negative on economic growth and investments6 and has represented a concern for the Government.

In the year under analysis, the government of Prime Minister Imran Khan was not significantly challenged by the political opposition – the Pakistan Democratic Alliance (PDM) – which was busy preparing for the 2023 general elections and weakened by internal frictions and conflicting agendas.

2. Pakistan in Afghanistan: a regional player with global ambitions

In the summer of 2021, as the US troops were leaving Afghanistan, Taliban militia launched an offensive, advanced rapidly toward Kabul and eventually took over bloodlessly the capital city on 15 August. In the weeks leading up to the fall of Kabul, Prime Minister Imran Khan did not comment on the progression of the insurgents and seemed to distance his administration from them.7 However, following a special meeting of the National Security Committee held the day after Kabul’s capitulation, Pakistan’s Foreign Office issued a statement that emphasised Islamabad’s readiness to promote a political solution to the conflict.8 Furthermore, the official statement called on the Taliban to respect the rule of law, protect human rights, and ensure that Afghanistan does not provide a haven to terrorist organisations.9

Pakistan launched a widespread advocacy campaign for forming an inclusive Government in Kabul in the framework of long-term peace, security, and development building. Toward this goal, Islamabad urged the international community to work with the Taliban establishment without political preconditions, in order to support Afghanistan’s socio-economic reconstruction and to avoid economic and humanitarian crises or a security vacuum that could destabilise the region. In addition, Pakistan was among the first countries to deliver humanitarian assistance to the population of Afghanistan.10

Islamabad has promoted itself to the international community as a responsible interlocutor motivated to support Afghanistan and the entire region’s stability.11 Pakistan is a member of the «Troika-plus» group, which includes Russia, China, Pakistan and the US. The grouping was initiated by Russia to facilitate coordination among the three countries that share similar views on peace in Afghanistan and that have an ongoing dialogue with the Taliban. The US is part of the Troika, given their pivotal role despite the withdrawal of their forces from Afghanistan.12

Islamabad has promoted a regional platform composed of Afghanistan’s neighbouring countries as a consultative mechanism to agree on a common regional approach to deal with the Taliban.13 In this regard, Foreign Minister Shah Mahmood Qureshi coordinated with his counterparts in Tajikistan, Uzbekistan, Turkmenistan and held meetings with the US Secretary of State and other counterparts from Turkey, the United Kingdom, Spain, India, Saudi Arabia, Germany, the United Arab Emirates (UAE) and NATO Secretary-General Jens Stoltenberg. Similarly, Imran Khan liaised with Russia’s President Vladimir Putin and agreed to cooperate and adopt a coordinated approach to Afghanistan also at the multilateral level within the Shanghai Cooperation Organisation (SCO).14 Mr. Khan also coordinated with the top Gulf leaders of Saudi Arabia, the UAE and Qatar.15 Furthermore, the Pakistani intelligence announced an unprecedented summit with Russian, Chinese, Iranian, Uzbek, Kazakh, Turkmen, and Tajiki counterparts, signifying Islamabad’s intention to raise its regional profile.16

As a result of these efforts, and notwithstanding differences and a cautious approach,17 a common understanding was reached to support an inclusive political solution in Afghanistan and maintain a joint security drive to advance shared objectives of a stable region.18

At the same time, Pakistan did not recall its diplomatic representation nor expressed concern for the reversal of the situation in Afghanistan. On the contrary, sections of its society welcomed the American pull-out and Taliban takeover.19 On his part, Prime Minister Imran Khan seemed to indirectly praise the role of the Taliban in supposedly empowering cultural authenticity in the bordering country.20

The events in Afghanistan have shifted the regional balance in Islamabad’s favour, as a stabilised Taliban-led bordering country would allow Pakistan to gain regional influence and establish its geoeconomic footprint. Multi-fold argumentations are brought forward to support this scenario.

First, in the last two decades, bilateral trade volume between former Kabul Governments and Islamabad dropped due to tense bilateral relations.21 With the Taliban’s return to power, the volume of Afghanistan’s imports from Pakistan has surged from US$ 890 million in 2019 to US$ 983.29 million in 2020–2021 while Afghanistan’s trade with India has decreased.22

Second, Islamabad shares China’s aim to protect CPEC investments from spill-over of potential jihadist chaos from Afghanistan to Pakistan. Beijing relies on Islamabad to ensure security to Chinese investments, and both are interested in extending the Belt Road Initiative to Afghanistan.23 This scenario unlocks Pakistan’s direct access to Central Asia and pushes forward the geoeconomics agenda of Islamabad.24

Third, Washington’s débâcle and the consequent disappearance of US presence in Afghanistan have ended the mutually distrustful security-focused strategic bilateral US-Pakistan relationship, started in the wake of 9/11. The withdrawal has also weakened the influence of the close regional ally of the United States in Afghanistan,25 India, which has been accused by Islamabad of being a spoiler for peace.26

Fourth, following the Afghan crisis, Pakistan is also expected to play a critical mediatory and liaising role in the interactions of Western powers with the new Government in Kabul. In addition, several member states of the European Union (EU) praised Pakistan for its crucial role in supporting the repatriation of numerous European citizens.27 Islamabad is also aware of its role in averting a refugee crisis in Europe, from which it expects economic, trade and reputational dividends.28

3. Uncertain relationships with the United States

In the aftermath of the 9/11 attacks, Pakistan became a strategic ally of the United States, initially negotiating with the Taliban for the handing over of Osama bin Laden, and later granting the support of its military bases to US military operations on Afghan soil. As a result, Washington lifted pre-existing sanctions imposed on Pakistan,29 cancelled Pakistan’s debts and declared Pakistan a non-North Atlantic Treaty Organization (NATO) ally in 2004.30 By 2010, Pakistan was one of the world’s leading recipients of US aid.

Subsequently, US military support started declining over growing mistrust, accusations and Washington’s use of aid and coercive diplomatic methods to end the alleged «double game» of Islamabad.31 Pakistan was repeatedly accused of maintaining a friendly relationship with Afghan insurgent groups, providing sanctuary to Taliban leaders and – while formally supporting the international coalition forces’ war on terror – allowing the presence of jihadist training camps in border regions.32 The year 2011 marked the pinnacle of US suspicions against Islamabad. In that year, Osama bin Laden was killed in a military operation conducted by the US Navy SEALs in Abbottabad, namely in Pakistan, where he had allegedly found a haven.33 Nonetheless, in 2017, President Trump, while announcing his new South Asia strategy, reiterated Pakistan’s critical counter-terrorism role.34 The following year, however, the US Government announced the suspension of most of its security assistance to Pakistan over its failure to deliver on its anti-terrorism commitments. That suspension remained in effect throughout 2019, when civilian aid was also narrowed.

Islamabad has repeatedly rejected these accusations as well those blaming Pakistan for supporting the Taliban’s final offensive.35 Still, the Country Report on Terrorism of the US Department of State issued in 2020 reiterates how modest have been the steps taken by Islamabad to counter terror financing and militant groups. On the one hand, the report confirms that Pakistan remains a safe harbour for terrorist groups, including the Afghan Taliban operating from Pakistani territory;36 on the other, it acknowledges Pakistan’s contributions to the Afghanistan peace process and improvements toward meeting the Financial Action Task Force (FATF) requirements.37 US President Trump requested Pakistan’s intervention to negotiate with the Taliban at the intra-Afghan peace negotiations in Doha, Qatar, which started on 12 September 2020.38 Pakistan advocated for a political settlement and the Taliban’s inclusion in power-sharing arrangements to end the conflict; meanwhile, the United States had started withdrawing its troops from Afghanistan as part of the agreement.

The post-9/11 US–Pakistan bilateral relations have been strategic and transactional, centred on Islamabad’s support to stabilise Afghanistan. Recently, Pakistan has mainly granted logistic support, air corridors, land and supply routes to the coalition forces to implement their withdrawal. Washington explored the possibility to extend further such cooperation with Pakistan following US military drawdown. In late May 2021, Pakistani and US national security advisors met in Geneva to discuss counter-terrorism cooperation to meet Washington’s needs to retain intelligence capability following the withdrawal from Afghanistan. Sources report US attempts to persuade Pakistan to use its military bases, including arguments related to possible US help in unlocking FATF reservations and supporting IMF-related decisions.39 However, Prime Minister Imran Khan repeatedly rejected the option publicly.40

Joe Biden’s cabinet has not assertively redefined the US–Pakistan relationship. For example, the Democratic Party 2020 Platform – the document of guiding principles and policy promises prepared in the run-up to the 2020 presidential elections – does not mention Pakistan and decouples it from Afghanistan compared with the 2016 version.41 Moreover, since Biden took office in January 2021, no contacts have been established by the new US President with Imran Khan.42

The US military withdrawal from Afghanistan ignited Islamabad’s concerns about the further decline of US involvement in Pakistan.43 For Pakistan, maintaining its partnerships with the United States remains a key political objective.44 Beyond counter-terrorism and security commitments, Islamabad aspires to engage in a broader relationship with Washington45 given that the United States is a significant source of foreign direct investment and Pakistan’s largest export market.46 The special assistant to the Prime Minister for national security, Moeed W. Yusuf, called for a paradigm shift in the US-Pakistan bilateral relationship from a geopolitical and geostrategic to a geoeconomics focus,47 reiterating Pakistan’s readiness to play a critical role in regional trade, business, and connectivity-related activities. Islamabad endeavoured to reassure Washington that the economic cooperation with Beijing and China’s supply of arms to Pakistan48 are driven by domestic priorities and do not reflect a geopolitical alignment against the United States. Therefore, Pakistan’s cooperation with China should not preclude US investments.49

The unenthusiastic reaction of the United States to Pakistan’s offers of cooperation reflects Washington’s perception of Islamabad primarily as a partner for counter-terrorism and security-related issues.50 However, Pakistan’s connectivity plans must be reality-checked against longer-term Afghanistan scenarios51 and still-tense bilateral relations with Delhi.52 Additionally, six years after its inception, the CPEC’s enhancements to Pakistan’s transit and trade have not yet made it the turning point for the country’s geoeconomics.53 Moreover, realigning its relations with the United States along economic parameters would improve Pakistan’s prospects of stability and the credibility of its investment climate for international investors. However, to be more attractive in a global market, Pakistan must undertake domestic economic reforms including tax and regulatory systems, which presently deter foreign investment.54 Finally, the Paris-based FATF is still monitoring Pakistan against the threat of money-laundering and terror financing, which constitute additional risks for international investors.

4. Transactional distension with India

Pakistan’s coveted foreign policy shift requires enhanced connectivity ties with target partner countries.55 Accordingly, Islamabad’s efforts have been directed towards exploring closer relationships with South Asian neighbours56 and deepening its engagement in Central Asia.57

Intervening at a Pakistan Air Force Academy ceremony in February 2021, the chief of Army Staff, General Qamar Javed Bajwa, spoke about Pakistan’s commitment to maintaining peaceful relations with India.58

On 25 February 2021, the Pakistani and Indian Directors General of Military Operations (DGMOs) issued a joint statement announcing a ceasefire and the observance of all agreements and understandings along the actual border, the Line of Control (LoC), «in the interest of achieving mutually beneficial and sustainable peace along the borders».59 The announcement came unexpectedly as just two years earlier, in February 2019, Indian and Pakistani warplanes had conducted airstrikes against each other’s territories after a terrorist attack had hit a convoy of the Indian Central Reserve Police Force in the Pulwama district in Kashmir.60 Moreover, New Delhi’s August 2019 decision to abrogate Jammu and Kashmir’s special autonomous status61 had exacerbated further bilateral relations.62

According to speculations, contacts of the intelligence agencies had preceded the DGMOs statement. Moreover, Joe Biden’s new US administration63 and the UAE64 reportedly played an instrumental mediatory role.

Soon afterward, while attending a two-day Islamabad Security Dialogue, both Prime Minister Imran Khan and General Bajwa stressed that peaceful relationships with India were critical to unlocking South and Central Asia’s untapped growth potential. They both highlighted the Kashmir dispute as the only irritant preventing friendly bilateral relations and stressed Pakistan’s readiness «to bury the past and move forward», wishing for a dedicated bilateral dialogue to be launched.65

Analysts concurred in considering the ceasefire a tactical move serving the short-term interests of both countries.66 Pakistan needs to consolidate its financial situation and prioritise external and internal stability given COVID-19 pandemic economic implications and its longer-term growth plans.67 Furthermore, peaceful bilateral relations with India have a positive impact on the volume of trade, recently reduced to about US$ 2 billion from the potential of nearly US$ 40 billion.68

The Pakistani public diplomacy narrative presented the ceasefire as an opportunity to create confidence-building measures, including cooperating to combat the Coronavirus69 and restore peace on humanitarian grounds.70 The ceasefire was also told to provide the momentum for more India-Pakistan engagement within multilateral settings.71 However, substantive engagement between the two countries was not visible. Pakistan was not offered to benefit from New Delhi’s bilateral vaccine diplomacy and it did not request vaccine doses to India,72 although both countries’ media repeatedly made that announcement. When the second pandemic wave severely hit India in the spring of 2021, Islamabad offered medical equipment and supplies and called for bilateral responses beyond political consideration.73 New Delhi, nonetheless, did not seem ready to accept such offers, even when requested by the governments of the states of the Indian Union.74 Likewise, an intense Pakistani social media activity displaying empathy towards the bordering rival did not result in actual foreign policy and diplomatic actions. Bilateral diplomatic relations, which had been downgraded in 2019 with the expulsion of the Indian High Commissioner to Pakistan and the recall of the Pakistani envoy to India, had a faint improvement when the issuance of diplomatic visas was resumed after 28 months of suspension.75

5. The resurgence of militant extremism

Afghanistan’s stability is critical for regional peace. The Taliban have co-existed with Pakistan’s extremism, epitomised by the Tehrik-i-Taliban Pakistan’s (TTP) fight against the national Government. The TTP movement originated in 2007 as a loose affiliation of militant groups traditionally based in Pakistan’s tribal areas. The movement increasingly violent activities culminated in the killing of 132 children at a school in Peshawar in 2014. This event triggered the Zarb-e-Azb military offensive on the part of the Pakistani armed forces, which badly mauled the TTP.76 Afterward, the Army declared the border region with Afghanistan «militant-free». However, extremist activities resumed in 2018, and recently the TTP has stepped up attacks both in tribal areas and elsewhere in Pakistan.77 Fearing a resurgence of domestic jihadism, Islamabad sealed its side of the border before the Taliban’s takeover to reopen it soon after for trade and restricted movement.78 In fact, following the progressive re-appropriation of control of Afghanistan by the Taliban, a surge in attacks has occurred in the provinces bordering Pakistan.79

In 2021, the TTP had a more decentralised organisation than previously and had revamped its operations in cooperation with other militant outfits operating beyond the North-Western tribal areas.80 Recently, the TTP has opened a new front against Chinese interests in Pakistan, particularly the CPEC. The TTP claimed responsibility for the suicide attack on an international hotel in Quetta, the capital of south-western Baluchistan province, which killed five people on 21 April 2021.81 The hotel was hosting the Chinese Ambassador to Pakistan, who was not present when the blast occurred. It is believed that the militant group has formed a tactical alliance with secular Baluch separatists’ groups.82 In November 2021, a temporary ceasefire between the PTI Government and the TTP entered into force amidst talks for a possible deal to end 14 years of conflict allegedly facilitated by Afghanistan’s new Taliban rulers.83

In July 2021, another attack launched against Chinese installations in Pakistan involved Chinese and Pakistani nationals working at the CPEC construction site of the Dasu hydropower project in the Upper Kohistan area of Pakistan’s Khyber Pakhtunkhwa province.84 Shortly thereafter, in August 2021, a suicide attack targeted a vehicle carrying Chinese nationals in Gwadar, Baluchistan.85

The TTP offered its support to the Tehreek-e-Labbaik Pakistan (TLP). The TLP is a hard-line political-religious organisation not associated with jihadist groups. TLP was founded in 2015 by Khadim Hussain Rizvi after the execution of Malik Mumtaz Hussain Qadri – the police guard who was found guilty of the murder of the former governor of Punjab, Salmaan Taseer.86 Opposing the blasphemy laws, Taseer had called for their reform as he considered them a tool used to persecute religious minorities. In the 2018 general election, the TLP won more than two million votes and three provincial assembly seats in Sindh.87 In November 2020, the TLP launched a protest against the French Government following statements by President Emmanuel Macron, who had defended a publication’s right to republish caricatures of Islam’s Prophet.88 Some, including Prime Minister Imran Khan,89 interpreted Macron’s statements as encouraging Islamophobia. The TLP demanded Pakistan to expel the French Ambassador and boycott French goods; conversely, the French Government asked its citizens to temporarily evacuate Pakistan.90

On 12 April 2021, radical Islamist Saad Hussain Rizvi, TLP leader and son of Khadim Hussain, was arrested by the Pakistani government in Lahore. Following Rizvi’s arrest, TLP activists organised a week of violent protests in Lahore, Karachi, Rawalpindi and elsewhere, demanding his release. As a result, a police station in Lahore was attacked, and eleven police officers were abducted and later released.91 Following these events, on 15 April 2021, the Government banned the TLP under the Anti-Terrorism Act 1997.92 In parallel, Imran Khan’s Government engaged in negotiations with the TLP. To end the protests which had also led to the killing of four police officers, the Khan Government agreed to debate the expulsion of the French Ambassador in the national Parliament. The resolution was tabled on 20 April 2020 without reaching a consensus about the fate of the French diplomat,93 while Rizvi and hundreds of TLP supporters were released.94 Khan also called on Muslim-majority countries to lobby European and other countries on perceived blasphemy-related issues.95

Despite having banned it, the government allowed the TLP to contest the by-election for a National Assembly seat in Karachi on 29 April 2019. While the Pakistan People’s Party (PPP) defeated the Pakistan Muslim League-Nawaz (PML-N) by a narrow margin, the TLP emerged as the third political force in the electoral contest, performing better than the PTI.96

On the same day, the EU Parliament adopted the resolution on «Blasphemy laws in Pakistan, in particular, the case of Shagufta Kausar and Shafqat Emmanuel».97 Kausar and Emmanuel are a Christian couple who had been on death row in Pakistan from 2014 to 2021, after being convicted of blasphemy.98 The resolution noted that Pakistan’s controversial blasphemy laws incite harassment, violence and murder against those accused and that blasphemy is a crime punished with the death penalty in Pakistan. The resolution also stressed that Pakistan’s blasphemy laws are «incompatible with international human rights laws and are increasingly used to target vulnerable minority groups in the country». The EU Parliament called on the Pakistani authorities to release Kausar and Emmanuel, overturn their death sentence and review and ultimately abolish the blasphemy laws and their application. Moreover, the resolution referred to the debated expulsion of the French Ambassador and called for a review of Pakistan’s eligibility for the Generalised Scheme of Preferences Plus status (GSP+). As mentioned in section 2, the GSP+ status removes import duties from products entering the EU market from specific countries. With Pakistan’s GSP+ status expiring in 2023, close monitoring will be applied for its possible further extension until 2034.99

The PTI Government decided not to compromise on the blasphemy law.100 However, in June 2021, the Christian couple was acquitted on appeal at Lahore’s Supreme Court, which ordered the release.101

TLP’s protests and violent demonstrations continued in October with a march to Islamabad following clashes in Lahore demanding the release of TLP leader Saad Hussain Rizvi and the expulsion of the French Ambassador.102 Following the new wave of disturbance, the Government reached a secretive agreement with the TLP, lifting part of the measures adopted against the organisation under the Anti-Terrorism Act.103

6. The economy

Stagnant exports and low foreign direct investments have made Pakistan dependent on external borrowings.104 In addition, US disengagement from Afghanistan and uncertainties about Washington’s plans with Pakistan have affected the domestic economy.105 In October 2021, Pakistan’s 39-month Extended Fund Facility (EFF)106 arrangement, approved on 3 July 2019, was completed. Islamabad has also raised additional debt with bonds, for which repayment additional debt is required.107 The IMF expected Pakistan to implement the COVID-19 response plan and stabilisation measures as announced in 2020.108 These measures included lower interest rates, subsidised credit for industry from the State Bank, increased power tariffs, revenue hikes and other measures. The Government of Imran Khan seemed inclined to focus on growth incentives and micro-finance social protection interventions, addressing the most disadvantaged sections of society.109 An intense debate in the country on the EFF’s stringent conditions led to Islamabad’s decision to renegotiate them to boost economic growth. In this regard, in May 2021, Finance Minister Shaukat Tarin reported that the government had communicated to the IMF that utility tariffs and taxes could not be raised due to COVID-19 pandemic-related hardships suffered by the people of Pakistan.

In 2020, widespread agreement among economists anticipated an economic shock in Pakistan due to COVID-19 outbreak-related disruptions.110 On 6 April 2021, the World Bank issued the Pakistan Development Update, a six-monthly report that examines economic developments and prospects in the country. The report highlights that after two decades of uninterrupted decline in poverty, the COVID-19 pandemic had reversed the trend in Pakistan. The analysis showed an estimated increase of poverty by 2.3% in FY 2020 (July 2020-June 2021), with 5.8 million additional people falling into poverty.111

The report, nonetheless, also showed signs of economic recovery and provided optimistic, although uncertain, projections of GDP growth (from -1.5% in 2019/20 to 1.3% in 2020/21, to 2.0% in 2021/22, to 3.4% in 2022/23) and declining inflation (from 10.7% in 2019/20 to 9.0% in 2020/21, to 7.0% in 2021/22, to 6.0% in 2022/23).112 According to the World Bank, the Pakistani financial sector remained resilient despite the economic slowdown, primarily due to its reconfiguration toward national securities rather than private-sector credit. Nevertheless, the Washington-based international financial institution highlighted the importance of the private sector in the recovery of the country and its vulnerabilities, requiring the support of specific policies aimed to facilitate the establishment of a conducive business environment.

The World Bank’s trends and projections echoed the results of the February 2021 IMF’s reviews of the EFF programme for Pakistan.113 The IMF attributed economic signs of recovery in Pakistan’s post-pandemic period to its adherence to the conditions accompanying the EFF programme.114 While the COVID-19 shock disrupted Pakistan’s progress under the EFF, the IMF acknowledged that the Pakistani authorities continued advancing their reform agenda. In particular, the IMF referred to fiscal stimulus, expansion of social safety nets, monetary policy support and targeted financial initiatives as having been critical to containing the impact on the economy since the first wave of the pandemic.115 As a result, the IMF assessed as satisfactory the programme performance and cleared a tranche of about US$ 500 million for disbursement.116 However, despite the good notes, the IMF recommended further efforts to remove structural impediments and strengthen economic productivity and private sector investment. As a result, according to the Bretton Woods organisation, growth slowed to −0.4% in FY 2020, while was expected to grow to 1.5% in FY 2021.117

In May 2021, the PTI Government announced an estimated higher-than-expected GDP growth of 3.94% in FY 2021 – about three times higher than the projection of 1.3% made by the World Bank in the South Asia Economic Focus report – and set the GDP growth rate target to 4.8% for FY 2022.118 These claims were received with scepticism by independent economists and opposition politicians.119 According to analysts, actual reforms were not being implemented in Pakistan.120 Experts considered the structural adjustment policy followed under the IMF aegis as being primarily focused on domestic growth financed by debt while no structural approach or sustainable mechanism was ensured. At the same time, Pakistan’s high defence spending (about 20% of overall expenditure) is a feature of the country’s economy which goes significantly beyond the global average of 2% of GDP and leaves a narrow margin of manoeuvre to use fiscal resources on development.121 Despite the onset of the COVID-19 pandemic, Islamabad increased its defence budget by 11% to US$ 7.85 billion compared to US$ 151 million allocated to healthcare.122

7. The plight of COVID-19 pandemic

Pakistan succeeded in controlling the spread of the first and second COVID-19 waves that hit the country in February and October 2020, respectively.123 As of December 2020, Pakistan recorded about 480.000 Coronavirus cases and more than 10.000 related deaths.124 In early 2021, about a year after the first recorded case, Pakistan’s COVID-19 toll stood well below what had been feared, reportedly 92% less than the worst-case scenarios that had been simulated.125 Experts have identified multiple concurring factors that might have contributed to containing the first two waves of the pandemic’s toll.

The Coronavirus disease’s impact on the elderly population in Pakistan was detected since the pandemic onset, yet 70% of the Pakistani population is below the age of 29.126 In addition, COVID-19’s death toll has been found to increase with certain comorbidities that occur at a low rate in Pakistan. In addition, it has been observed that Pakistanis have a non-specific immunity to the Coronavirus, due to multiple exposures to various vaccines.127 On the response level, the government of Pakistan showed a strong political will to combat the pandemic.128 In 2020, the military took the lead in the COVID-19 response.129 To oversee the pandemic response, the National Command Operation Centre (NCOC) brought together public health experts and representatives from all provinces. A programme of selected (smart) lockdowns was initiated, which has been found to reduce the risk of transmissions.130.

Pakistan’s PTI Government entered agreements with several vaccine makers.131 In January 2021, the Drug Regulatory Authority of Pakistan (DRAP) approved the first three COVID-19 vaccines for emergency use: the vaccine produced by the Anglo-Swedish multinational pharmaceutical and biotechnology company Oxford-AstraZeneca;132 the Beijing Institute of Biological Products (BBIBP) CorV – or Sinopharm – produced by the Chinese state-owned enterprise China National Pharmaceutical Group Corporation;133 and the Russian COVID-19 vaccine, Gam-COVID-Vac, or Sputnik V.134 Half a million doses of the Sinopharm vaccine were provided free of cost and reached Pakistan in February 2021.135 Soon afterward, Pakistan reached an agreement to purchase the vaccine from Sinopharm.136

A national COVID-19 vaccination drive was launched on 3 February 2021 with China-supplied shots, starting with frontline healthcare workers.137 The inception of the national vaccination campaign faced challenges with vaccine uptake,138 storage and distribution and some hesitancy of the population.139 In addition, the immunisation campaign was initially slow amidst an initial shortage of supplies.140

On 12 February 2021, Pakistan approved the emergency use of the fourth vaccine, the single-dose Convidicea, developed by the Chinese pharmaceutical company CanSino Biologics (CanSinoBIO).141 Later, Pakistan reached an agreement with CanSinoBIO to import three million doses of the vaccine.142 Simultaneously, it was announced that 17 million doses of the Oxford-AstraZeneca vaccine would be provided to Pakistan by the COVAX facility.143

As of April 2021, a slow vaccine rollout was recorded, with about 2% of the population having been inoculated.144 In the meantime, the nationwide positivity ratio of Pakistan increased amidst a relaxation of basic health standard operating procedures to contain COVID-19 reaching 10.62% against 10.15% recorded in April 2020.145 The so-called «third wave» of the pandemic was traced back to the spread of three variants of COVID-19146 and portrayed a different, deadlier scenario in Pakistan. With over 137.000 cases and 3.000 deaths, April 2021 surpassed any precedent monthly averages and imposed the government of Islamabad to adopt restrictions to mobility and public facilities.147 Meanwhile, the DRAP approved the fifth vaccine against the virus for emergency use, the Coronavac, popularly known as Sinovac, developed by the Chinese company Sinovac Biotech.148

Pakistan was one of the first countries to allow private imports of COVID-19 vaccines.149 In March 2021, the pharmaceutical company AGP Pharma received the first shipment of 50.000 doses of privately imported Sputnik V.150 Similarly, Pakistani AJ Pharma – CanSinoBIO’s local partner – imported the Chinese Convidecia. The first batch of bulk CanSinoBIO vaccines was formulated, sterilised and packaged by the National Institute of Health (NIH). This step preceded NIH local vaccine manufacturing of the first batch of Chinese CanSino named PakVac.151 In addition, Pakistan’s Searle Company concluded an exclusive licensing and supply agreement with the Chinese firm Livzon Mapharm Inc. for the manufacturing transition, licensing, and supply of the V-01 Coronavirus vaccine in Pakistan following trials. This contract was the first one signed by Pakistan with a pharmaceutical company aimed to start the domestic production of the COVID-19 vaccine. It offered the opportunity to speed up the vaccination process and develop domestic biomanufacturing capacity.152

Pfizer-BioNTech COVID-19 vaccine153 was the sixth vaccine approved for emergency use by the DRAP after its first shipment reached Pakistan at the end of May 2021 under the COVAX programme.154 Later, in July, the seventh vaccine, Moderna,155 was also approved by the DRAP.156

Presenting the 2020–2021 federal budget, federal Minister of Finance Shaukat Tarin announced the Government’s allocation of US$ 1.1 billion to procure Coronavirus vaccines and plans to vaccinate 100 million people by July 2022.157 Islamabad undertook such efforts both under bilateral agreements, such as the agreement with the United States,158 and multilateral agreements such as with the World Bank. The latter allocated over US$ 150 million to the pandemic response in support of the ongoing national vaccine drive in Pakistan.159 The measures taken by the Government succeeded to contain the Coronavirus third wave. As a result, despite some peaks, by summer 2021 the infection rate started declining and both reported cases and deaths decreased.160 As of December 2021, over 150 million doses of COVID-19 vaccines were administered, with about 70 million people – about 30% of the population – fully vaccinated. In the same period, Pakistan registered a total of 1,3 million cases and nearly 30.000 fatalities.161

8. Weakened political opposition

In 2021, the PTI administration concentrated mainly on foreign policy. Struggling with internal frictions and geared towards preparing for the 2023 general elections, the political opposition did not represent a significant cause of concern for Imran Khan.

In 2020, eleven opposition parties – the PDM – joined forces on an anti-Government plan to oust Prime Minister Imran Khan. The alliance included the PML-N, the PPP, the Jamiat Ulema-e-Islam-Fazl (JUI-F), the Pakhtunkhwa Milli Awami Party and the Awami National Party (ANP). They challenged the PTI Government under the leadership of Maulana Fazlur Rahman of the JUI-F.162

As had occurred in previous attempts to coalesce political opposition groups, the PDM was undermined by the diverging agendas of the two leading parties, the PPP and the PML-N.163 Any effort to give substance to an alliance that existed only in theory did not lead to any concrete results, allowing Imran Khan’s government to fend off all opposition challenges, remaining in power without too much difficulty.164Eventually, even this largely theoretical opposition unity broke down when the ANP and the PPP quit the PDM, respectively, on 6 and 11 April 2021.165

In the lead-up to the 2023 general elections, frictions surfaced inside the PML-N party on matters concerning leadership and opposition parties.166 PML-N President Shahbaz Sharif, former chief minister of Punjab and brother and former Prime Minister Nawaz Sharif,167 was released in April 2021, after being arrested in September 2020 in a money laundering case.168 In Shahbaz’s absence, Nawaz Sharif’s daughter and PML (N) Vice President Maryam Nawaz Sharif and former Prime Minister Shahid Khaqan Abbasi adopted a rigid stance on the relations with the members of the PDM alliance. Also, Maryam espoused her father’s fierce anti-establishment narrative.169 The PDM’s failure to oust Prime Minister Imran Khan and its fragmentation over the hard-line PML (N) positions170 favoured Shahbaz’s strategy aimed at recompacting the opposition as the only way to successfully challenge the PTI Government in view of the general election, due in 2023. The majority of the PML (N) party seemed to favour Shahbaz Sharif’s positions,171 and a change of the party’s political approach, highlighting it, became visible. However, Shahbaz’s positions did not obtain Nawaz’s agreement172 as the former Punjab Chief Minister’s aim appeared to be the elimination of Maryam from the political arena, in order to be the only candidate for the office of prime minister.173

9. Conclusions

Pakistan’s Economic Outreach Initiative puts the economy at the centre of the country’s external affairs and reflects national aspirations to play a prominent international role. Domestic and regional peace and stability are preconditions to creating a conducive environment for Islamabad to achieve its goals. With this backdrop, Islamabad has strengthened bilateral ties with strategic partner countries. On the one hand, Islamabad enjoys an ongoing bilateral partnership with China, which is enhanced by the CPEC, and shares joint interests with Beijing in engaging with Afghanistan. In addition, Islamabad has corroborated its relationships with South and Central Asian countries in the period under review. Notably, following the military leadership’s decision to «extend hand of peace in all directions», a ceasefire was announced jointly with India in February 2021. On the other hand, American disengagement in Afghanistan was accompanied by the weakening of the strategic partnership with Pakistan, based on anti-terrorism commitments undertaken after the 9/11 attacks. The United States has not prioritised future relations with Pakistan while intensifying those with India, and Islamabad has not yet succeeded to convince the new administration in Washington of its vision of economic partnership.

Although the US military withdrawal from the neighbouring country caused Pakistan’s concern as Washington’s support is critical to ensure continued IMF assistance, the changing circumstances in Afghanistan offer Pakistan a chance to push forward its geoeconomics agenda. This is because Islamabad has promoted itself internationally as a credible interlocutor, engaged in supporting Afghanistan and the entire stability of the region.

Pakistan has achieved good results in containing the spread of the pandemic. Also, financing institutions have reported surfacing signs of national economic recovery, although structural deficiencies persist. Furthermore, the Pakistani administration’s attention to foreign policy and the national implications of the global health emergency has been accompanied by the absence of significant challenges posed to Imran Khan by political opposition, who are primarily focused on preparing for the 2023 general elections.

ISSN 2385-2526