12 April 2022 18:16:24 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

Crisis grips India’s neighbours — Pakistan and Sri Lanka

In decades, senior officials in the South Block and the Prime Minister’s Office in New Delhi have never been this busy or tense. A European conflict with all the features of a world war brewing inevitably places India all at sea. Facing the US’s subtle pressure to back the West against its decades-long primary arms supplier Russia, the country is also dealing with its own issues to revive the economy and combat inflation.

As though walking this tight rope was not enough, the Indian subcontinent fell into utter chaos this week with crises in both Pakistan and Sri Lanka. Seven months after the West's disastrous exit in Afghanistan, Pakistan and Sri Lankan stories threaten to destabilise an already sensitive region.

Instability in Pakistan

Pakistan's case is more severe given its stature as India's nuclear-armed neighbour. As recently as a year ago, flamboyant cricket-star turned politician Imran Khan seemed to be comfortably coasting towards completing a full five-year term as Prime Minister — a feat that no Pakistani elected leader has ever achieved.

But Khan fell again to the age-old travails of any modern leader in that country when the military lost its confidence in him. This time, it was over the appointment of the head of Pakistan's feared ISI, its intelligence service.

Khan and the military fought it out behind closed doors, but the latter won out, as it always does. The military signaled to opposition leaders that it would not come in the way of a no-confidence motion if one were tabled. Emboldened, Khan's defectors and former allies joined the opposition in bringing such a motion.

Knowing that he would likely lose the vote, Khan cleverly suspended the parliament and called for a snap election, arguing that the people should decide the outcome of the impasse. This extraordinary move plunged the country into a constitutional crisis. Who is more powerful? The parliament or the Prime Minister?

Last week, the Pakistan Supreme Court weighed in, ruling that Khan improperly suspended the parliament and ordered the no-confidence vote held on Saturday. Expectedly, Khan lost and was ousted from office. Mian Muhammad Shahbaz Sharif, a Pakistani politician and brother of former PM Nawaz Sharif, was then sworn in as the 23rd and current prime minister.

Khan had charged that the US had a hand in this political mess, and there is probably some truth to his accusation. For nearly two decades after 9/11, Pakistan's economy has depended heavily on the US's largesse, first to fight the Taliban and Al Qaeda and later join the US in the global war on terror.

The military and the ISI are heavily reliant on American technology and the billions that America gladly gives to keep the organisations well fed. Khan's political folly was that he took an anti-West stance and moved Pakistan closer to China, abandoning his support for the war on terror. This alarmed America and India, too, given how China has recently increased its presence in the region through its multi-billion dollar investment projects

New elections are likely to be held in six months, and Khan, a fearless campaigner, has a chance to win his office back if he makes amends with the military. Sharif, born into wealth after inheriting the family's steel business, has been the Chief Minister of Punjab province for years.

His family is known to be corrupt — Nawaz Sharif was forever banned from holding the PM's office on a corruption charge — so Pakistan faces a stark choice this October. No matter who steers Pakistan forward, its threat to the region is constant because of its nuclear weapons.

Economic crisis in Sri Lanka

Meanwhile, to India's south, Sri Lanka suddenly collapsed as a functioning democracy. A country reliant on tourism and tourist dollars had suffered the consequences of travel bans because of Covid-19. Then, the Russia-Ukraine war took hold. Already facing rising prices, the cost of everything — from fuel to food — skyrocketed. Massive anti-government protests against the Prime Minister Mahinda Rajapaksa shone a global light on the crisis.

Heavily indebted to foreign financial institutions, the country struggled to make interest payments on its sovereign debt. The government confidently predicted that it sought to restructure its obligations just five days ago. "What Sri Lanka is keen to do is avoid a hard default," a source from the ministry who requested anonymity told AFP. "It will be a negotiated restructuring of the debt with the help of the IMF."

But today, the government announced that it was defaulting on $51 billion on external debt in an extraordinary move. International financial institutions will demand that the country further devalue its currency (after last month's 15 per cent depreciation) and raise taxes.

Last month, the government tightened imports on all big-ticket items hoping to conserve foreign exchange to buy oil, food, and medicines. The rapid pace of events has thrown an entire nation into a fiscal boondoggle, from which recovery will be exceedingly painful.