Amid the din of political chaos, there is a nascent ray of hope. It concerns the internal security situation, which has significantly deteriorated in the country since the rise of Afghan Taliban to power next door last August. News reports indicate that peace talks between the government and the TTP militants are being brokered by the new Afghan government, and there is cautious optimism for tangible progress this time.
Why does this matter for the economy? At a time of heightened macroeconomic vulnerabilities and extreme political instability, the last thing this flailing economy needs is to have the gradually-declining security situation spiral out of control. With elevated economic and political risks affecting investor valuations of this market, there is also the need to avoid further damage to the country’s market potential for existing as well as potential foreign investors in both real economy and paper economy.
Moreover, considering that Pakistan is banking on its benevolent friends (mainly China, and to an extent Saudi Arabia and the UAE) to bail out the country financially, an improvement in the security situation will replenish the confidence of these foreign friends about the capability of the state of Pakistan to resolve its security issues and provide a safe and secure environment to visitors and businesses from these countries.
Additionally, improved security matters a great deal for continuation and acceleration of CPEC. That multi-billion-dollar G2G initiative has seen setbacks in recent years, due to reasons including reduced fiscal capacity on Pakistan’s end, recent attacks on Chinese projects and personnel, along with some sprinkling of geopolitics. The recent attack on Chinese academics in Karachi had further raised question marks on the law enforcement authorities’ capacity to protect Chinese individuals in Pakistan.
The threat of terrorism is coming from different actors and complex sources, but together they present a deadly combination that undermines the state’s writ in several parts of the country. Therefore, it makes practical sense to have dialogue with militants that are willing to make concessions, and in the process, reduce the scope and scale of overall threat. Talking with the TTP is not an easy choice at all, considering their role in the APS Peshawar attack in December 2014. It evokes strong emotions in the country.
With the Afghan government actively mediating in these peace talks, there is also a possibility that the declining trajectory of Pak-Afghan relations (due to issues around border fencing, cross-border attacks into Pakistan, among others) can be arrested. Reportedly, the fierce (but Pakistan-friendly) Taliban leader Sirajuddin Haqqani is using his political capital to act as a bridge between the two sides. Stable Pak-Afghan relations are in Kabul’s interest, as it opens space for them to engage with other regional players.
If the government-TTP ceasefire (or a semi-ceasefire) is extended into the future, it will provide the time and room for mediators and negotiators to do their job. Some concessions have reportedly been made by the government already (including releasing a few high-value militants) – this is a major reason why the dialogue is still on track despite all the difficulties. The challenge still remains the same: soften the militants’ extreme demands and bring them to accept the constitution of Pakistan.