News Analysis: Pakistan’s irreparable economy?

Ishaq Dar who chaired the ECC meeting on January 25, 2023. PID/File
Ishaq Dar who chaired the ECC meeting on January 25, 2023. PID/File

AMID the rapid economic collapse, the writing on the wall for Pakistan’s future is clear – that the country is facing another major crisis in its history.

After the State Bank lifted a cap on Pakistan’s foreign currency exchange rate, the sharp drop in the value of the rupee had to be added to the already high rate of inflation. The change comes shortly after the State Bank of Pakistan (SBP) raised interest rates to 17 percent as it seeks to combat inflation hovering around 30 percent.

In a sharp departure from Finance Minister Ishaq Dar’s repeated public claim to keep domestic fuel prices unchanged, Pakistanis must now prepare for a hike in petrol and diesel prices in the coming days.

As petroleum products are imported into Pakistan, the depreciation of the rupee should not only be a jump in the price of domestic fuel, the resulting inflation should hit various consumers from owners. from private transportation to public transportation such as trucks and buses.

Besides, the increase in the price of diesel will inevitably increase the cost of production in agriculture and industry. In the long run, although not a direct result of ordinary consumers, the airlines are likely to increase the cost of domestic and international rupee denominated airfares.

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Meanwhile, the official clamor to place the blame for Pakistan’s current economic problems on the last government is neither genuine nor productive. Dar came to work in his latest tenure, promising to oversee the appreciation of the rupee at the rate of 200 rupees to the US dollar. And the end result of today’s forex market is nothing but a massive departure from that ambition.

Besides, a delayed return to the IMF loan program has cost Pakistan dearly in the past and is likely to do so in the future. The reported planned increase in domestic gas tariffs of more than 70 percent is not just a sharp hit to consumers.

The increased possibility of backdating the payment of July last year at the beginning of the current financial year, should translate into more arrears in future gas bills. In addition, with a large circular debt surrounding the energy sector, a large jump in electricity costs is likely to come soon.

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Other areas set to be hit include more expensive imported raw materials for daily use items especially medicines, food and consumer goods. Meanwhile, Pakistan’s dire outlook for the near future coincides with ruling politicians raising the temperature.

On the one hand, the intensified push to arrest opposition politicians like PTI’s Fawad Chaudhary is likely to repeat itself as often witnessed in the past as the rising political temperature caused by the PTI fueled its agitation. will only worsen the prospects of finally strengthening Pakistan’s economy. .

On the other hand, placing the responsibility on previous regimes as done recently by Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar, only promises to deepen the government-opposition divide over future economic policies. .

Ahead of the arrival of an important mission representing the IMF (International Monetary Fund) on Tuesday (31st January), the heated political temperature in Pakistan saw Sharif and Dar set the tone for their political message on Friday when they chose to publicly target PTI for The current pitfalls of Pakistan’s economy.

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Pakistan’s overall direction raises a key question – what exactly will be required to revive Pakistan’s seemingly stagnant economy.

In an election year, more and less popular reforms to overcome the current economic challenges are not in the capacity of the ruling structure and other main political parties, nor what they have publicly confirmed. that view.

An alternative framework should be built on broad public support in Pakistan for painful reforms, especially seeking more revenue than the Pakistani state collects and further reductions in imports along with -target that has so far missed the recovery of exports.

But is the Pakistani public set to rally behind a class of tried and tested politicians with dirty pasts? That question remains negative as Pakistan faces what now appears to be an unsustainable economy.


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