Will new wave of terror derail Pakistan’s nascent economic revival?

medium119111340The Pakistani state’s control over its western borderland has never been absolute. Last week, the horrific hijacking of a train by Baloch separatists showed that what little authority it had is fraying. Four soldiers died retaking the Jaffar Express; 21 of the hundreds of hostages had already been killed by the militants, some of whom may have been in the military as well.Sparsely populated Balochistan has long resented Islamabad’s rule. But separatist activity has intensified in recent years, particularly after Pakistan invited Chinese companies to develop Gwadar port and exploit local minerals. One such organisation, the Baloch Liberation Army (BLA), claimed this attack.Pakistan’s military — which, rather than the civilian government of Prime Minister Shehbaz Sharif, retains control over national security — was quick to blame the Afghan Taliban government in Kabul for allowing the BLA to operate from its soil. Relations between the two countries are at a familiar low.Certainly, the establishment is no longer gloating that the extremists it supported managed to outlast the US military. The Afghan Taliban’s takeover of Kabul has emboldened its fellow travellers. The Pakistani Taliban killed 558 people in 2024, almost twice as many as in the previous year. Baloch separatists murdered more than 500, up from 116 in 2023.The resurgence of terrorism in Pakistan’s wild west has complicated Sharif’s already difficult job. He wants to focus on steering the country away from economic crisis, but issues from Afghan relations to Baloch discontent demand his government’s attention. These are problems that need political solutions.The disconnect between the grim drumbeat of terror attacks on the country’s margins and the positive economic news from its heartland is startling.Inflation is running at 1.5%, down from almost 40% in just two years. Investors in the Karachi stock market were given a world-beating 84% return last year, and expect about 40% this year. The government looks stable enough now that foreign investors have returned to buying its short-term debt. As the soldiers finished their grim task in Balochistan last week, Moody’s was announcing that it had changed its outlook on the banking system from stable to positive.Much of this is thanks to the civilian government’s work raising revenue and managing public debt. Privatisation efforts and new taxes mean that revenue may increase enough for the International Monetary Fund to keep running its $7bn loan programme. And China has promised to roll over its $2bn loan book as well. medium nocaptionhttps://youtu.be/bz_WFOhAwfE?si=m9keky8P7nMA4EEfNew success stories are emerging out of the country, as well. It’s now one of the largest markets for solar panels in the world; just the amount it bought in 2024 would be enough to raise installed electricity capacity in the country by a third.But Sharif’s work at staving off crisis, particularly by stabilising the current account deficit, clearly hasn’t pleased everyone. Economic gains are always at risk if you don’t come to some accommodation with your rivals, political or geopolitical.Jailed Opposition leader Imran Khan, for example, directly targeted the economy when he asked his supporters abroad to stop sending money home. Without workers’ remittances, Pakistan wouldn’t have the foreign exchange it needs for imports, particularly of energy. Fortunately, Khan’s irresponsible gambit failed, with remittances growing 29.3% in 2024. But he has more than enough supporters to paralyse the nation’s streets whenever he gives the order.The Pakistani Taliban feels similarly to Khan about the return of economic stability, and has turned to threatening firms linked to the military. Given the military’s presence in business, you could read that as a threat against the country’s entire economic infrastructure.Pakistan’s nascent economic revival could be swiftly jeopardised if terror and insecurity spread from the country’s tribal borderlands to its urban centres. That has happened in the past, and it is a very real danger again today.The compact at the heart of the current Pakistani dispensation is simple: The elected government repairs the economy, while the military keeps the country calm. It is clear now that this is an unstable bargain. As one Pakistani newspaper put it: “While there is a visible security angle to the Balochistan crisis, at its heart it is a political problem, which needs a political solution.”That’s true not just of Balochistan, but of all the other destabilising factors in Pakistan — from relations with Kabul and Beijing to the anger of Khan’s supporters. Pakistan can’t be governed if politicians focus only on the economy while allowing all its other problems, even knotty ones like federalism and foreign relations, to be dealt with purely as “security” issues by the army.The military, too, must recognise that they will lose credibility when they fail to manage security — and failure is guaranteed without some form of political outreach to the various discontented factions. They have to allow the politicians to take some risks and show some independent leadership.Sharif has done well to steady Pakistan’s economy. It’s time for him to become a prime minister, not just a glorified finance minister.