Pakistan's new government takes office this week, and optimism is in the air.
Pundits point to the Pakistan Muslim League-Nawaz's (PML-N) resounding election victory on May 11, and suggest it will use this mandate to implement critically necessary policy reforms. Presumptive prime minister Nawaz Sharif, observers insist, is more mellow and mature than he was during his previous terms as prime minister. They cite his post-election conciliatory moves-from a visit to the hospital bed of political rival Imran Khan to an invitation to Indian Prime Minister Manmohan Singh to attend Sharif's swearing-in ceremony.
Some of this optimism is warranted. But let's be realistic: despite Pakistan's political transition, the nation's troubling structural realities-from reform-resistant vested interests to state-sponsored support for militancy-remain entrenched. We should therefore keep our expectations in check, and hope for relatively modest achievements from Islamabad's new leadership. These include improving the economy, stabilizing civil-military ties, and maintaining adequate relations with India and the United States. Success, however, will hinge on four unpredictable factors.
Wildcard #1: Tax reform
Sharif appears determined to address Pakistan's sinking economy and debt-driven energy crisis. The PML-N's election manifesto depicts "economic revival" as a chief concern, and in recent days PML-N officials have said they hope to phase out costly subsidies and institute energy pricing reforms.
The question, however, is if the party can truly engineer an economic recovery. The answer will depend on Pakistan's ability to secure new revenue sources-and expanding the national tax base is a much-needed step (according to one recent report, only 768,000 Pakistanis-0.57 percent of the population-paid income tax last year).
Given its dire economic straits, Pakistan is likely to request a fresh loan from the International Monetary Fund (IMF)-and the IMF will probably condition future lending on tax reform. How much political capital is Sharif willing to expend to produce this long-elusive outcome? How hard will Sharif, who has made a fortune in the sugar industry, push back against entrenched agricultural interests that resist tax reform?
Recent comments by Sartaj Aziz, a former finance minister and top PML-N official, raise additional questions. Aziz said the PML-N isn't yet ready to approach the IMF, and will instead focus on its own economic recovery efforts. Optimists may interpret this to mean the government will use the next few months to implement reforms before going to the Fund. Pessimists, however, may conclude that Islamabad simply wants to go it alone-a troubling prospect for a country with dwindling reserves that, if needed, could cover only five weeks of imports.
Wildcard #2: Pervez Musharraf
The man who overthrew Sharif in a 1999 military coup is now under house arrest outside Islamabad. What Sharif chooses to do with Musharraf will help shape the trajectory of the premier's volatile relationship with the institution that once ousted him.
In 1997, Sharif won an election by a wide margin-and promptly used this mandate to challenge the military's authority. Some may fear he'll use his latest large mandate to again undercut the military-not necessarily by challenging its authority directly, but by taking a sharply anti-military position on a key policy issue. One possibility could be pushing for more reconciliation with India than the military is willing to sanction.
However, early indications suggest the two sides are ready to bury the hatchet. Sharif is blaming Musharraf personally, not the military as a whole, for the events of 1999. One week after the election, Sharif held a three-hour meeting with General Ashfaq Kayani-and the army chief pledged full cooperation on all of the issues that Sharif wants to tackle. Soon thereafter, the Finance Ministry released budgetary projections for the next fiscal year. Strikingly, defense services funding allocations were 15 percent higher than those in this year's budget.
So does this all portend smooth sailing for civil-military relations? Not necessarily. The army wants Musharraf out of Pakistan, and Sharif has reportedly informed Kayani that he'd like Musharraf gone before taking office. However, the PML-N announced last week that it plans to try Musharraf for treason-a prospect that would anger the army, which is already displeased about its former leader's detention. It's still possible a deal will be brokered that sends Musharraf back into exile-and perhaps one is already in the works: This week, rumors abounded that he will visit his ailing mother in Dubai. Yet if a trial does take place, Sharif's relations with the military could again be plunged into crisis.
Wildcard #3: Extremism in Punjab
Militancy in Pakistan's most populous province threatens prospects for better ties with India-and the economic benefits that would arise from rapprochement.
Sharif desires improved relations with New Delhi-and trade normalization is a prime objective. Economists estimate that normalization would increase bilateral trade from less than $3 billion to $40 billion. It would also bring much-needed relief to Pakistan's free-falling, revenue-starved economy by placing at Pakistan's disposal, literally next door, one of the world's largest and fastest-growing markets.
Such a tantalizing vision, however, could be shattered by militancy in Punjab. This province, which borders India, is the PML-N's stronghold-and a bastion for anti-India militant groups, including Lashkar-e-Taiba (LeT), which orchestrated the 2008 Mumbai terror attacks. Some, like Jaish-e-Mohammad (JeM), are based in southern Punjab. Others, like Harakat-ul-Mujahedeen, have a strong presence in Rawalpindi, the city that hosts Pakistan's military headquarters. LeT leader Hafiz Saeed lives free in Lahore.
Neither Sharif nor his brother Shahbaz-the last chief minister of Punjab's provincial government, which the PML-N has run for years-has dealt with this problem. During the recent election season, the PML-N chose cooperation over confrontation. Punjab's law minister campaigned with the leader of one sectarian extremist group, while rumors abounded of a PML-N electoral alliance with another.
Encouragingly, Sharif promises to be tough on anti-India militants-he has vowed to ban speeches that "incite jihad" against India, and specifically singled out Saeed's. Yet questions remain about his actual willingness to target these actors (some Indian analysts allege-without elaboration-family "links" to the LeT), much less his ability to do so (Pakistan's security establishment has long regarded these anti-India groups as strategic assets). Ultimately, Sharif's ability to boost ties with India will depend on the extent to which he confronts the militants who wish to destroy it.
Wildcard #4: The provincial government of Khyber Pakhtunkhwa (KP)
This province, which abuts the militancy-ravaged tribal areas bordering Afghanistan, will be governed by Imran Khan's Pakistan Tehreek-e-Insaf (PTI) party. The PTI stridently opposes U.S. drone strikes, and favors non-military solutions to extremism, including peace negotiations with the Pakistan Taliban (TTP). The PTI's ability to stabilize this volatile region, just across the border from where the United States is fighting a war, will bear heavily on Islamabad's relations with Washington.
Sharif's relations with the United States have been relatively friendly since the 1990s, when as premier he worked closely with Bill Clinton (photographs of the two leaders adorn the walls of Sharif's Lahore mansion). Though Sharif's campaign rhetoric featured sharp criticism of drones and the U.S. war on terror, his post-election comments about Washington have been cordial. Last week, during an appearance with James Dobbins, the new U.S. special envoy for Afghanistan and Pakistan, Sharif said the two nations would work "in complete cooperation to curb terrorism."
KP's PTI-led government, however, could jeopardize this goodwill. If it engages the TTP, the latter could enjoy more freedom of movement in KP-affording it greater opportunities to target the NATO supply vehicles that pass through the province, and to intensify its cross-border attacks on U.S. troops in Afghanistan. Such a prospect would pose a conundrum for Sharif, who wants a workable relationship with Washington yet also shares the PTI's desire to talk to the Taliban. Would Sharif, to protect his relations with Washington, pressure the PTI to change course? Or would he honor the party's engage-the-TTP position, and throw his support behind the PTI?
Either way, the PTI will be tested immediately. Last week, after the TTP's top deputy was killed in a drone strike, the organization withdrew its offer of talks with Islamabad and threatened new attacks. The PTI's response to stepped-up violence will have major ramifications for American efforts in Afghanistan-and also for Pakistan, which receives billions of dollars of U.S. aid.
There's reason to believe Pakistan's new government can kickstart the economy, peacefully coexist with the military, improve relations with New Delhi, and cooperate with Washington. Yet it's important to acknowledge the spoilers that could sabotage each of these prospective success stories. Pakistan, after all, remains a troubled country where soaring hopes are often sorely dashed.
Ultimately, by keeping our expectations about Islamabad's new leadership in check, we set ourselves up for less disappointment-while also allowing for the possibility of being pleasantly surprised.
Michael Kugelman is the senior program associate for South Asia at the Woodrow Wilson International Center for Scholars. He is available at firstname.lastname@example.org or on Twitter @michaelkugelman.
AAMIR QURESHI/AFP/Getty Images