• Economy and Budget
• Opposition unity
• New DG ISI appointed
• FATF censures Pakistan again
• PM Imran Khan at the SCO summit
• Peace and Reconciliation moves
• President Ghani visits Pakistan
• President Ghani at the SCO summit
II Developments in Pakistan
Economy and budget
The government presented its budget for the financial year 2019-20 in the Parliament on June 12 in the midst of a precarious economic situation. From the conditions of the staff level agreement signed between the IMF and Pakistan in May, it was clear that the budget would entail belt tightening all around and bring hardship to the common people. With an eye on such impending measures, the Pakistan army, which corners a large part of the national resources, announced that it would take a voluntary cut in its budget, but its spokesman clarified that it would not be at the cost of defence and security and would be managed internally by the three branches of the armed forces taking into account strategic compulsions. The pre-budget economic survey acknowledged that the economy had slowed down sharply, registering growth of 3.3% in the last financial year as against the target of 6.3%, with nearly all sectors performing below expectation. Runaway imports and swelling trade and current account deficits were listed as the major challenges faced during 2018-19, putting a lot of pressure on the meagre foreign exchange reserves; though around $9.2 billion in deposits placed with the State Bank of Pakistan by Saudi Arabia, UAE and China provided some cushion.
The budget for 2019-20 projects the economy to grow at 2.4 % and inflation to remain between 11 to 13%. The provision for current expenditure shows a substantial increase, while development expenditure is set to fall. Over half of the current expenditure is dedicated to defence and interest payments on domestic and foreign debt. Significantly, in spite of the announcement of a voluntary cut by the army, the provision for defence budget has gone up by about 5%. (It was revealed later in the month that besides the above increase, the armed forces had also obtained the largest supplementary grant of Rs.36 billion over the budget estimates of last year!) The total development expenditure shows a decline of 17.5% compared to the last year’s provision. The focus of such expenditure will be on social welfare projects. The budget projects a revenue increase of 11% over the last year, with the fiscal deficit of 7.2% of GDP, the highest in the last ten years. Apart from higher prices for some food and everyday use items, the budget will also entail a heavier income tax burden. The annual income limit for exemption from income tax has been reduced and the tax rate increased both for salaried and non-salaried persons. Given the poor record of revenue collection in the past, independent observers have expressed doubts about the government’s ability to raise the projected revenues. Within days of announcement of the budget, the government also raised power tariffs for all consumers in keeping with the IMF agreement.
The government decided to set up a high powered body – The National Development Council (NDC) to be headed by the Prime Minister which besides some other civilian functionaries of the federation and provincial Chief Ministers, will also have the Chief of Army Staff as a member. According to its terms of reference, the NDC will, inter alia, formulate policies and strategies for development activities aimed at accelerating economic growth, approve long term planning for national and regional connectivity and provide guidelines for regional cooperation. With this step, the government formally accorded a role to the army, which already has a significant presence in all sectors of the economy through its foundations aimed ostensibly at welfare of its personnel, in economic policy making at the highest level. Speaking at the National Defence University later in the month, the COAS said that Pakistan was going through a difficult economic situation due to fiscal mismanagement and the nation needed to support the difficult decisions taken by the government for long term benefits. He also emphasized greater regional connectivity for the development of the region.
Even as Pakistan awaited approval of the IMF bailout package by its Executive Board, the Qatari Emir, who visited Pakistan in June, promised $ 3 billion in the form of deposits and investments. It was reported a few days later that Qatar had deposited the first tranche of $500 million in the State Bank of Pakistan. The largesse was seen as linked to Pakistan’s role in facilitating talks between the US and the Afghan Taliban, multiple rounds of which have taken place in recent months in Qatar.
In a reminder of the pulls and pressures faced by the Pak judiciary, a reference filed by the government against the Supreme Court Judge, Justice Qazi Faez Isa, for consideration by the Supreme Judicial Council has become extremely controversial. The government has accused Justice Isa of acquiring properties abroad in the name of his wife without accounting for the sources of funding the purchase. Significantly, Justice Isa had given a judgment in a case concerning the sit in staged by the Barelvi extremist party, Tehreek-e-Labbaik Pakistan (TLP) in 2017 against the then PML(N) government, blocking a major access to the Pak capital. The agitation was reported to have the support of the security establishment. When TLP eventually lifted its siege after an agreement with the government, the agitators were seen receiving money from army men in uniform before dispersing. In his judgment, Justice Isa had, inter alia, directed all institutions of the state, including its (intelligence) agencies, to stay within their mandate. All bar councils of Pakistan have opposed the reference and lawyers observed a strike on June 14, the day the Supreme Judicial Council took up the matter, on a call by the Pakistan Bar Council. The government, however, remained firm on pursuing the case against Justice Isa even as the controversy remained live at the end of the month.
The government’s accountability campaign against prominent opposition leaders, described as political vendetta by the opposition parties, continued. Hamza Shehbaz, the son of PML(N) President Shehbaz Sharif, was arrested by the National Accountability Bureau (NAB) in connection with two money laundering cases. Former President Asif Ali Zardari was also arrested by NAB on corruption charges. Separately, the government set up a Commission of Enquiry to enquire into the sharp increase in Pakistan’s debt under the PPP and PML(N) governments after 2008. Interestingly, the commission will also have a representative of the ISI among its members.
In the face of the government onslaught, the principal opposition parties continued their efforts at forging unity, with an immediate focus on the unpopular decisions of the government included in the budget. After their well-publicized meeting in May at an Iftar dinner, Bilawal Bhutto and Maryam Nawaz met again in June and attacked the “anti-people” budget presented by the government. They condemned the reference against Justice Isa and called for production of the arrested leaders in Parliament. An opposition conclave was held on June 26 under the chairmanship of the JUI(F) chief Maulana Fazlur Rehman. Among those present were leaders of PPP and PML (N). The conclave, inter alia, unanimously rejected the budget and vowed to oppose it in Parliament and condemned the reference against Justice Isa. They decided to launch a countrywide protest movement and observe a black day on July 25. They also agreed to move a no-confidence motion against the Senate Chairman, who has affiliations to the government and rejected the debt enquiry commission as well as constitution of the National Development Council. They called for an end to the involvement of state institutions (a reference to the army) in politics.
New DG ISI appointed
Lt. Gen. Faiz Hameed was appointed DG ISI to replace Lt. Gen. Asim Munir Shah, who was shifted to the post of Corps Commander of Gujranwala barely eight months into his tenure. Lt. Gen. Hameed belongs to the Baloch regiment (the same as that of the COAS) and had earlier served as Director General Counter Intelligence in the ISI, in which capacity he, inter alia, handled the above mentioned agitation of Tehreek-e-Labbaik Pakistan in 2017. PML(N) had blamed him for engineering defections from its ranks in the run up to the 2018 election. According to some political observers, his appointment signals a deeper involvement of the army than hitherto in governance and political affairs and a tough approach towards groups such as the Pashtun Tahafuz Movement. He may also be helpful to General Bajwa, should he seek an extension in his tenure beyond November this year, when he completes three years as COAS.
FATF censures Pakistan again
After review of Pakistan’s case at its meeting in Orlando in June, the Financial Action Task Force (FATF) expressed concern that Pakistan had failed to implement the agreed plan to curb terror financing, first by the deadline of January this year and yet again by May end. It strongly urged Pakistan to swiftly implement the action plan by October when the last set of items of the plan are due to expire and added that otherwise “the FATF will decide the next step at that time for insufficient progress.” The FATF noted in particular that the Pakistani authorities do “not demonstrate a proper understanding of Pakistan’s transnational terror financing risk.” Pakistan will next come up for review before the FATF during its meeting in Paris in October. According to media reports, Pakistan escaped being shifted from the grey to the black list of FATF at Orlando because of support of Turkey, China and Malaysia. With an eye on the Paris meeting, the Counter Terrorism Department of the Pak Punjab claimed that 12 leaders of banned groups (4 of JuD and 8 of JuM) had been convicted by anti-terror courts of terror financing and sentenced to imprisonment for 2 to 5 years.
Later in the month, speaking at the International Institute for Strategic Studies in London, COAS Bajwa said that Pakistan was doing its best to wipe out terrorists, but added: “It is a fact that peace and stability in South Asia is dependent on the resolution of conflicts and disputes in the region.” He thus made elimination of terrorism conditional upon resolution of the regional conflicts and disputes.
Prime Minister Imran Khan wrote to Prime Minister Modi congratulating him on his election victory and calling for finding a solution to the Kashmir and other issues through talks. Foreign Minister Qureshi wrote a similar letter to the new External Affairs Minister, S. Jaishankar. However, in the run up to the SCO summit at Bishkek, the spokesperson of the Ministry of External Affairs said that no meeting between the two Prime Ministers was planned at Bishkek. In his meeting with President Xi of China, Prime Minister Modi reiterated that Pakistan needed to create an atmosphere free of terror, but at this stage, we did not see it happening. Responding to PM Khan’s letter, PM Modi said that India wanted a normal and cooperative relationship, but for that Pakistan needed to create an atmosphere free of terror and violence. According to media reports, the two Prime Ministers had only a courtesy interaction at Bishkek, involving a handshake and exchange of pleasantries.
Pakistan extended the ban on use of its airspace for flights to and from India twice during June, first from June 14 to 28 and again to July 12. Though Pakistan had agreed in principle to permit the flight of PM Modi to and from Bishkek to use its airspace in response to an Indian request, the Prime Minister eventually chose not to use the Pak airspace and took a longer route to the SCO summit.
According to media reports, India and Pakistan will participate in the joint counter terror exercise of SCO in Kazakhstan in 2019.
Speaking before the House Foreign Affairs Subcommittee for Asia, the Principal Deputy Assistant Secretary Alice Wells said that on Afghanistan reconciliation, Pakistan had taken steps to encourage Taliban participation in peace negotiations, which had been important to the progress made so far, but much more work was to be done to bring peace to Afghanistan. She added that the US continued to urge Pakistan to make good on its pledge to take sustained and irreversible actions against terrorist groups operating within its borders for long term stability and prosperity of the region. During his visit to India at the end of June, Secretary of State, Mike Pompeo said that the US had done a 180 degree turn with respect to Pakistan and was trying to get it to cease terror campaigns in India. He claimed credit for the action taken against Pakistan by the FATF. At the end of the month, Foreign Minister Qureshi said that PM Imran Khan and President Trump were due to meet soon.
PM Imran Khan at the SCO summit
Speaking at the SCO summit at Bishkek, Prime Minister Imran Khan stressed the importance of SCO in a multipolar world. He reiterated Pakistan’s importance due to its geographical location and the connectivity that it provides to the region. Condemning terrorism in all its forms, he stressed Pakistan’s success in the war on terror, offered to share its experience with others and pledged to remain actively engaged in SCO’s counter-terrorism initiatives. He said that the China-Pakistan Economic corridor “the flagship of President Xi’s far-sighted Belt and Road Initiative” was fast reaching fruition and would in time “catalyse the creation of an integrated pan-Asian sphere of shared prosperity”. Supporting peace and reconciliation in Afghanistan through an Afghan-led and Afghan-owned peace process, he added that finally there was a realization that there was no military solution to the conflict in Afghanistan. “SCO’s support for post-conflict Afghanistan will remain crucial,” he said. According to him, enduring peace and prosperity in South Asia would remain elusive until the main dynamic in South Asia was shifted from confrontation to cooperation and it was important to seize opportunities for peaceful resolution of outstanding disputes and collective endeavours for regional prosperity. On Iran, he said that implementation of the Joint Comprehensive Plan of Action by all parties was essential for international and regional peace.
III Developments in Afghanistan
Peace and Reconciliation moves
The US Special Representative, Zalmay Khalilzad embarked upon a trip to various countries, including Afghanistan, Pakistan, Germany, Belgium and the UAE, at the beginning of June in the run up to the seventh round of his talks with the Taliban due to begin in Qatar later in the month. In his Eid message, Mullah Haibatullah Akhundzada, head of the Afghan Taliban said that no one should expect them to end Jihad or forget their sacrifices over forty years before reaching their objectives- an end to the occupation and establishment of an Islamic state. The Taliban remained adamant at not talking to the Afghan government. However, the German Special Representative for Afghanistan and Pakistan said that his country was willing to facilitate intra-Afghan dialogue. It was reported that the Taliban reluctance to talk to the Afghan government would be overcome by having any government functionaries in the Afghan delegation participate in the talks in their personal capacity.
Speaking at the UN Security Council, India’s Permanent Representative cautioned against a hasty deal with the Taliban that is dictated by the US timeline to withdraw its forces rather than the best interests of Afghanistan. He added, without naming Pakistan, that the sanctuaries and safe havens provided to the terror groups should be addressed for genuine and sustainable peace. In his speech at the SCO summit, Prime Minister Modi described a united, peaceful, safe and prosperous Afghanistan as an important factor for stability and security in the SCO region. He expressed support for the efforts of the government and people of Afghanistan for an Afghan-led, Afghan-owned and Afghan-controlled inclusive peace process.
In a press interview, President Trump said that some good things were happening in Afghanistan and he wanted to get out of “these endless wars.” Visiting Kabul at the end of June, Secretary of State Pompeo said that he hoped for a peace deal with the Taliban “before September 1”. The statement implied that the Americans are working with a deadline. Pompeo added that the US was nearly ready to conclude a draft text outlining the Taliban promise never to allow Afghanistan to be used as a base for international terrorism and in the light of this progress, they had commenced discussions with the Taliban regarding removal of foreign military presence, but there was no agreement on a timeline for this purpose.
A Lahore based think tank hosted prominent Afghan politicians in Pakistan at an Afghan peace conference, which was held with the backing of the Pak government. Amongst the 57 Afghan participants were Gulbuddin Hekmatyar, Karim Khalili, Atta Noor Mohammed, Mohammed Mohaqiq, Younus Qanooni, Ismail Khan and the Presidential candidate Hanif Atmar. The organizers said that the initiative was meant to help start an “intra-Afghan dialogue”. Speaking at the meeting, Foreign Minister Qureshi said that nobody in Pakistan subscribed to any notion of the so called strategic depth in Afghanistan. He reiterated that Pakistan wanted to see a peaceful, stable, united and democratic Afghanistan. The meeting was clearly an attempt by Pakistan to show its reach to and connect with a range of Afghan politicians.
The seventh round of talks between Khalilzad and the Taliban commenced in Qatar on June 29. Earlier in the month, the Afghan government had announced the release of nearly 900 Taliban prisoners. The Taliban made it clear that their focus remained on withdrawal of foreign forces. Even as the talks opened in Qatar, the Taliban killed 26 members of a pro-government militia in north Afghanistan.
President Ghani visits Pakistan
President Ashraf Ghani paid a two-day visit to Pakistan at the end of June at the invitation of Prime Minister Imran Khan. The President’s spokesman said on the eve of the visit that discussion would be held on regional connectivity, trade and transit, investment, security and peace talks with the Taliban. However, the real aim of the visit appears to have been to seek Pakistan’s help in softening the Taliban resistance in talking to the Afghan government. A statement issued by the Pak Prime Minister’s office said that the two countries had agreed to reboot their relationship with a “forward looking vision”. The two leaders expressed their commitment to work together to broaden and deepen bilateral trade, streamline transit trade and strengthen efforts for connectivity.
President Ghani at the SCO summit
Speaking at the SCO summit at Bishkek, President Ashraf Ghani said that Afghanistan considered the US commitment to a political solution to be credible and was coordinating to build the necessary international consensus on peace. However, without a regional consensus on peace and addressing Taliban’s interdependencies with their supporters (a reference to Pakistan), breakthroughs will take time. He added that although the Afghan war was multi-dimensional, reaching a peace agreement with the Taliban was a key component for the reduction of violence. He made the following suggestions on Afghan peace:-
• A regional and international coalition for peace should be formed.
• A regional task force should be formed to develop projects for regional connectivity and poverty reduction.
• The issue of narcotics as a driver of conflict and criminality should be comprehensively addressed within the peace-making framework.
• An agreement on a regional framework for fighting terror.
Ghani said that the Presidential election in Afghanistan will be held on September 28.
The SCO summit declaration expressed the belief of the member countries that one of the key factors in preserving and enhancing security and stability in the SCO region was a prompt settlement of the situation in Afghanistan. They supported the efforts of the government and people of Afghanistan aimed at restoring peace, economic development of the country, countering terrorism, extremism and drug crime.