Pakistan’s new government could improve ties with the US and India

The Pakistani parliament has elected Shehbaz Sharif as the country’s new prime minister, just days after his predecessor Imran Khan was ousted in a vote of no confidence.

Aamir Qureshi | AFP | Getty Images

Pakistan has a new Prime Minister – and this may well warn against the return of the South Asian country to a healthier traditional economy and its relations with its supporter, the US, as well as its rival, India.

On Monday, the Pakistani parliament elected Shehbaz Sharif as the new prime minister of the country, just days after his predecessor Imran Khan was ousted in a vote of no confidence.

In what one observer called the “confirmation of democracy,” the move was by no means inevitable in a country where no prime minister has served a full term.

Surprising observers, the almighty Pakistani army, which has ruled the country for decades by organizing coups, remained in the barracks.

A decisive intervention by the judiciary was the next surprise. The Pakistani Supreme Court ruled that Imran Khan’s government needed a no-confidence motion that it had sought to block. Khan eventually lost the re-scheduled vote of confidence in the early hours of Sunday and was removed from his office.

What will Sharif do?

In his first speech, the 70-year-old Sharif said he intended to re-establish Pakistan as a “paradise” for investment, while also announcing an increase in the minimum wage.

Sharif’s way forward is not easy, Iqbal Singh Sevea, the director of the Institute for South Asian Studies at the National University of Singapore, told CNBC.

“He has inherited an economy rattled by a current account deficit and inflation. He will have to increase the state’s capacity to collect revenue through taxation and increase investment, especially in the export sector,” the associate professor said.

The dream for Pakistan is that they can export to China. The reality for Pakistan is that they are exporting to the US and Europe.

James Schwemlein

Senior Director, Albright Stonebridge Group

Pakistan is on its 23rd bailout from the IMF. The country’s economy is under pressure from rising inflation, with more than 10% this year, amid spiraling prices of crude oil and other goods after the war in Ukraine.

“Under his supervision, Pakistan is likely to negotiate another loan with the IMF and will have to commit itself to structural reforms and generate more tax revenue,” Sevea said. “The task is all the more difficult because he will have to do this without cutting subsidies and going against welfare policy.”

Sharif is an internationally known figure, according to James Schwemlein, a senior executive at Washington-based Albright Stonebridge Group, who pointed to his reputation as a competent manager.

“Shehbaz Sharif ran Pakistan’s largest province, Punjab. He did so to a large extent developing a very positive effect on business. He was responsible for major infrastructure investments. He is well known to all international interlocutors – whether they are American or Chinese, “he said.

India: Improved Relationships?

In particular, India will pay attention to the new administration.

The way events unfold in Pakistan is likely to provide an opening for New Delhi to improve relations with its neighbor, former Indian Secretary of State Shashank told CNBC.

Pakistan’s ‘Confirmation of Democracy’, would provide an “opening to move forward with bilateral relations,” he said.

“But the test will be signals from the Sharif government and its almighty army,” Shashank added. “The Pakistani army is desperate to build relations with the US,” he said.

US: Tire Repair

The main priority for the new government would be to repair ties with Washington, analysts said.

Khan had used his oft-repeated accusation of an American plot to oust him from power to block the vote of no confidence against his government. He claimed that the US was overwhelmed by a perception that Pakistan had moved closer to Russia and China under him.

Khan had moved away from the traditional pro-American establishment position to pursue a markedly different foreign policy, and embraced China’s Belt and Road projects, Schwemlein told CNBC’s Asia Squawk Box.

Calling his antagonism to the US “dangerous” for Pakistan, he told CNBC on Monday: “The dream for Pakistan is that they can export to China. The reality for Pakistan is that they can export to the US and Europe.”

Pakistan’s economic fortune is largely tied to maintaining positive relations with the West, but Khan “acted against it,, said Schwemlein.

It is likely that the new Sharif government will align itself closer to the US

China: Strategic ties

Pakistan has forged ties with both the US and China as a way to overcome its security dilemma and maintain its balance of power with India, according to Shibani Mehta, a research analyst at Carnegie India.

“Because of its history with the US and China, Pakistan needs them more than they need them,” Mehta said. “The United States did not show much appetite for engaging in regional disputes. China’s motivations are primarily rooted in a shared wariness and history of war with India; and commercial interests in Pakistan,” she said.

A change in Pakistan’s relationship with one or both of them will depend on the strategic goals of Washington and Beijing.

Shibani Mehta

Research Analyst, Carnegie India

“A change in Pakistan’s relationship with one or both will depend on the strategic goals of Washington and Beijing,” she added.

But Sevea pointed out that, regardless of who came to power, it was the army that would remain an important say in Pakistan’s foreign policy.

“Given the concerns within the military over Imran Khan’s criticism of Pakistan’s relations with the US and the army chief’s assertion of the importance of relations with the US, it is likely that Sharif will try to return. to a balance of the two, “he said.

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