Poor leadership choices and nepotism stemming from long-standing dynastic political culture have hindered effective governance in Pakistan and, among other things, contributed to the Pakistani economic crisis from 2022 to 2024
By Sameer Arshad Khatlani
In the summer of 2022, devastating floods submerged one-third of Pakistan and left 1,400 people dead and 33 million displaced. It cost the country an estimated $30 billion or 9% of the Gross Domestic Product (GDP), widened the current account balance, and depleted hard currency. Miftah Ismail, a former economist with the International Monetary Fund (IMF) and a PhD in public finance from the Ivy League University of Pennsylvania, was perhaps better suited to deal with the escalating crisis having taken office four months earlier in April 2022 as the finance minister following the fall of Imran Khan’s government.
But three-time former prime minister Nawaz Sharif, the de facto leader of the biggest party in Pakistan’s ruling alliance, sacked Ismail for no apparent reason to pave the way for his close family member, Ishaq Dar, to take over as the finance minister. Ismail seemingly kept the seat warm for Dar, a chartered accountant by training, who was declared a proclaimed offender over corruption charges after fleeing the country in 2017. Dar sought asylum in the United Kingdom after his passport was cancelled.
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Dar was given the key post as soon as he returned to Pakistan, subverting processes after the Sharifs managed their way back into power when Khan fell afoul of the country’s military establishment. Pakistani politicians are notorious for their inability to see beyond their noses, and much of the Pakistani economic crisis from 2022 to 2024 had to do with this. Dar’s elevation as the finance minister is a case in point.
Top party and government positions under Nawaz Sharif and now his brother, Shehbaz Sharif, the current prime minister, have remained with their family and fellow Kashmiris. Dar, a Kashmiri, is the father-in-law of one of Nawaz Sharif’s daughters. The Pakistani economic crisis deepened from 2022 under his watch, all but emptying foreign exchange reserves until a recovery process began in 2025. The country was at one point left with dollars to cover a month of imports.
Dar failed to convince the IMF to clear the $1.1bn loan needed to prevent Pakistan from going bankrupt. Pakistan was already struggling to service its high foreign debt. The annual inflation soared to the highest since 1975 to over 27% in January. The Pakistani rupee is now at a record low of 275 to the dollar under Dar’s leadership. Dar retained his place in the council of ministers as the foreign minister when PML (N) returned to power in 2024 despite his dismal record. He was later elevated to the position of deputy prime minister.
Between A Rock And A Hard Place
The COVID-19 pandemic and Russia’s invasion of Ukraine worsened Pakistan’s economic crisis. The invasion led to an increase in global fuel prices. The floods destroyed farmland and increased the prices of wheat, onions, etc. Pakistan was caught between a rock and a hard place. Imran Khan’s my way or the highway politics contributed to political instability and the Pakistani economic crisis. He promised to change Pakistan’s deeply flawed political culture by replacing the self-centered politics of dynasties.
Khan ended up creating a personality cult while governance went for a toss. He continued his game of thrones when any sensible leader would have been expected to bury the hatchet to save the country from default. Khan insisted on having snap polls when the floods added to the instability. He addressed rallies to press for his demand, claiming he was removed from power at the United States (US) behest before backtracking.
Khan refused to accept opponents as legitimate rivals and showed a lack of mutual tolerance and forbearance, which Pakistan needs badly for democracy to take root. He chose confrontation when Pakistan needed consensus to sort out its existential problems, leaving the country more polarised. Khan promised a ‘new Pakistan’ but proved no better than traditional politicians.
Blatant Nepotism
The Sharifs do not appear to have learnt much from their past mistakes, including blatant nepotism that has marked their politics. When he became the prime minister in the 1990s, Nawaz Sharif gave the reins of power to his brother, Shehbaz Sharif, in Pakistan’s biggest province of Punjab. The control of their party was handed over to Shehbaz Sharif following Nawaz Sharif’s disqualification from holding public office for allegedly buying luxury flats in London through illegally obtained money via offshore holdings.
Shehbaz Sharif’s son, Hamza, briefly headed the provincial government in 2022 before Imran Khan’s party wrested power from the Sharifs in Punjab. Like his uncle and father, Hamza faced corruption allegations but remains in charge of the party in Punjab. Nawaz Sharif’s daughter, Maryam, widely seen as the heir to Nawaz Sharif in national politics, is now the Punjab chief minister.
The Status Quo
Pakistan’s politics has, since the 1990s, been all about dynasties such as the Sharifs with little commitment to ideology. The status quo has been maintained through kinship and patronage networks. The Sharifs have preferred their own – Kashmiris– for key Cabinet posts. Nawaz Sharif’s insistence on having fellow Kashmiri Ziauddin Butt as the army chief precipitated the coup that cut short his second term in power in 1999.
The coalescing of the 14 political parties to oust Imran Khan in 2022 was seen as a desperate attempt by the traditional dynastic politicians to save the status quo under which power has remained with two families over the last three decades. Shehbaz Sharif replaced Imran Khan as the Prime Minister only because Nawaz Sharif and Maryam were then ineligible for the top post because of their graft conviction. His government suffered a credibility crisis as Nawaz Sharif was accused of remotely controlling it from the United Kingdom, where he lived from 2019 to 2023.
The elder Sharif did not return to Pakistan until 2023 after he was allowed to go to London for treatment on the condition that he would return to serve his remaining prison term. Shehbaz Sharif and his Cabinet colleagues frequently visited London to consult with Nawaz Sharif. Key members of the Cabinet were away in London as Pakistan grappled with issues such as price rise and a faltering economy.
Stunning Reversal
Pakistan’s economic crisis marks a stunning reversal of the country’s high growth rates, which began in the 1960s when the country’s economy was revived through agrarian reforms, a stimulus to the industry, and foreign investment. State-backed capitalism and alliance with the US powered a ‘golden era’ of high growth rates in the 1960s. The growth was significant enough for the international media to note it. In January 1965, the New York Times predicted that Pakistan might be on its way towards an economic milestone reached by only one other populous country, the US.
A year later, The Times, London, called Pakistan’s survival and development ‘one of the most remarkable examples of state and nation-building in the post-war period.’ Pakistan was ‘considered to be one of the few countries at the time that would achieve developed-country status.’
Saving Grace
Islamic charity, including zakat, has been the saving grace as Pakistan’s economy suffered. Zakat positively impacts the economies of countries with significant Muslim populations and helps reduce poverty, increase economic growth, and purchasing power parity. Pakistanis contribute significantly to zakat, the third of Islam’s five foundational pillars (literally something that purifies), paid globally.
Muslims, accounting for the world’s 22% population, are believed to have paid almost $2 trillion in charity in 2015. By 2020, this was projected to surpass $3 trillion, equal to the French economy’s size. A Muslim is obliged to pay at least 2.5% of savings, investments, and the value of valuables such as gold and silver, as zakat. A bulk of the charity is paid through non-banking channels and helps a large section of people in Pakistan make ends meet.
According to the research by Development Initiatives, a global organization involved in harnessing data to end poverty and reduce inequality, zakat in Indonesia and Pakistan could potentially meet all ‘current requirements to respond to domestic humanitarian emergencies, with significant amounts remaining to cover other areas of zakat spending.’ But for an inept and greedy ruling elite, harassing any form of potential is a tall order.
Khatlani is a journalist and an author
