The 1958 coup that brought General Mohammad Ayub Khan to power in Pakistan failed to bring any immediate change in the dispute with Afghanistan over the creation of a Pathan state in the North-West Frontier region of Pakistan. In 1960 the prime minister of Afghanistan, Mohammad Daoud Khan, sent troops across the border into Bajaur (Pakistan) in a foolhardy, unsuccessful attempt to manipulate events in that area and to press the Pashtunistan [Pakhtunistan] issue, but Afghan military forces were routed by the Pakistan military. During this period the propaganda war, carried on by radio, was relentless.
Afghanistan and Pakistan severed relations on September 6, 1961. Traffic between the two countries came to a halt, just as two of Afghanistan's major export crops, grapes and pomegranates, were ready to be shipped to India. In a valuable public relations gesture, the Soviet Union offered to buy the crops and airlift them from Afghanistan. What the Soviets did not ship, Ariana Afghan Airlines flew to India in 1961 and 1962. At the same time, the United States attempted to mediate the dispute, although its ties with Pakistan were a stumbling block.
In addition, much of the equipment and material provided by foreign aid programs and needed for development projects was held up in Pakistan. Another outgrowth of the dispute was Pakistan's decision to close the border to nomads (members of the Ghilzai, variously known as Powindahs or Suleiman Khel), who had long been spending winters in Pakistan and India and summers in Afghanistan. The Pakistani government statement denying the decision was related to the impasse with Afghanistan appeared disingenuous, and the issue added to the brewing conflict between the two countries. Afghanistan's economic situation continued to deteriorate. The government was heavily dependent upon customs revenues, which fell dramatically; trade suffered; and foreign exchange reserves were seriously depleted.
By 1963 it became clear that neither Daoud of Afghanistan nor Ayub Khan of Pakistan would yield; to settle the issue one of them would have to be removed from power. Despite growing criticism of Ayub among some of his countrymen, his position was generally strong, whereas Afghanistan's economy was suffering. In March 1963, with the backing of the royal family, King Zahir Shah sought Daoud's resignation on the basis that the country's economy was deteriorating as a result of his Pashtunistan policy. Because he controlled the armed forces, Daoud almost certainly had the power to resist the king's request, yet he resigned, and Muhammad Yousuf, a non-Pashtun, German-educated technocrat who had been minister of mines and industries became prime minister.