The ruling Pakistan Tehreek-i-electoral Insaf’s defeats in local government elections in the ruling party’s stronghold of Khyber Pakhtunkhwa on December 19 confirmed what many political and economic observers had been warning its leadership about for some time. The party’s and Prime Minister Imran Khan’s political capital has been eroded by the rising cost of living, stagnant salaries, and rising unemployment.
The admission by party leaders from the province, where the PTI made history by winning a second consecutive term in 2018, that rising prices were a major factor in their defeat in the first phase of the local elections, shows that the leadership underestimated public outrage over rising energy, food, and other essential costs.
The government will face a difficult 20-month period leading up to the next elections, owing to its poor economic management more than the opposition’s challenge.
The fact that rising living costs are putting a strain on the country’s low-middle-income segments, and that people are dissatisfied with the government’s poor economic performance, was evident in the findings of recent public opinion polls. According to Transparency International Pakistan’s National Corruption Perception Survey 2021, approximately 86 percent of Pakistanis believe their income has been squeezed under the PTI government, and 92.9 percent say inflation is at its peak during the present administration. Only 4.6 percent and 2.5 percent of respondents, respectively, believed that prices rose quicker under the PML-N government in 2013-18 and the PPP government in 2008-13.
The PTI government’s ‘incompetence,’ according to the survey participants, is the main cause of price inflation and falling incomes, with 50% of respondents labelling the current administration inept. 23.3 percent blamed the price spike on corruption, while 16.6 percent blamed it on a lack of policy implementation.
Many political analysts predict that the electoral pattern seen in the first phase of the local government elections in Khyber Pakhtunkhwa will continue in the second phase, as well as in Punjab in March/April. That’s not everything. The likelihood of a big backlash against the PTI, which came to power on the promise of stabilising the economy, reducing poverty, and generating jobs, in the 2023 elections cannot be ruled out either.
Although Imran Khan and his ministers have repeatedly blamed the recent surge in international commodity inflation — particularly in energy and food — on global supply disruptions caused by the Covid pandemic hangover for the domestic price hike, such explanations have largely failed to impress the general public.
Economists have often blamed rising domestic prices on reckless government policies aimed at quick development through monetary expansion and weak fiscal policy in the run-up to the next elections, rather than the global commodity boom.
If the results of the local elections in Khyber Pakhtunkhwa are any indication, the script has gone astray. Even the government’s announcement of a Rs120 billion price alleviation scheme for low- and middle-income households failed to work. Prime Minister Imran Khan is facing a political liability as a result of the government’s economic woes. People are complaining about the rising expense of living in unprecedented ways, and popular approval of the government is at an all-time low.
The question today is whether the government has the necessary resources to overturn the current political climate. Many pundits think that the political consequences of inflation for the cash-strapped PTI administration are considerable, and that due to its financial restrictions, it lacks the fiscal space to deliver significant relief to the people.
The government’s hand will undoubtedly be forced even more by the scheduled resumption of the International Monetary Fund (IMF) lending programme next month. The government is preparing to introduce the Supplementary Finance Bill 2021, which will impose taxes of Rs350-400 billion as a condition for the acceptance of the IMF funding resumption, and is expected to raise electricity costs in February/March. Both of these policies, like the monthly increases in the petroleum development levy (PDL) on petroleum goods, will raise inflation.
The political ramifications of such unpopular, inflationary policies under the IMF funding programme would be enormous, as the majority of people and small businesses would see their income squeezed and their cost of living rise, with the major opposition parties — the Pakistan Muslim League-Nawaz and the Pakistan People’s Party — preparing to capitalise on the country’s widespread economic discontent, particularly in Punjab. The following 20 months leading up to new general elections will be difficult for the government, owing to its bad economic management more than the opposition’s challenge.