Pakistan’s inflation is on an all-time high, adding to economic headwinds and rocking PTI. With great difficulty Pakistan, this month secured a $6 billion loan from the International Monetary Fund to help avert a balance of payments crisis following high fiscal and current-account deficits and dwindling foreign exchange reserves. Therefore, it wouldn’t be harsh to say that Pakistan Economy is in doldrums and this financial relief was the only hope for Pakistan to save itself from economic catastrophic failure.
IMF Versus CPEC
The global financing body, IMF had reservations and asked Pakistan to furnish details of loans from China. IMF was concerned about Beijing’s financial assistance due to the non-transparency of contracts. However, Pakistan clarified saying there is no overlap between bailout project and CPEC.
In the last six months, Pakistan has received approx $8 billion in grants and loans from Saudi Arabia, the United Arab Emirates, and China. These influxes helped stave off foreign reserve crisis.
Pakistan has received at least $10 billion in grants and loans from Saudi Arabia, the United Arab Emirates and China but the country is still under considerable strain. Unfortunately, the current account deficit remains high, fiscal consolidation is slow and there is a surge in core inflation.
Close to completing one year in the chair, all that we see Mr. Khan doing is blaming the previous governments for this fiasco. PTI was quick to lure voters and convinced them that the corrupt would be brought to the desk. There were talks of austerity measures and so on. However, little action is seen on the ground so far.
As inflation erodes trust in the national currency as a store of value, it also erodes the associated national pride, and this is felt by all citizens especially the poor who are affected disproportionately. Let us here from the PTI voters how they see PTI leadership tackle this albatross around their neck.
The blame game is the easiest way to fool public
Excerpts from an interview with former Finance Minister Ishaq Dar
How do you view the Pakistani government’s economic policies? Will the IMF’s financial bailout package help stabilize the economy?
Ishaq Dar: The PTI government is incompetent and irresponsible. It actually wasted months to conclude its agreement with the IMF. I am also not satisfied with the IMF conditions that the government has accepted. This IMF program will contract Pakistan’s economic growth, with high inflation and high-interest rates. The common people will face the brunt of this.
Ishaq Dar: There are no signs of it. Our government sealed a different kind of agreement with the IMF in 2013, and we successfully completed it in September 2016 — the first time in the country’s history. We made sure that the program focused on high growth, and in three years, Pakistan’s growth reached close to 6% — the highest in the past 15 years.
On the contrary, our successors have massively devalued the Pakistani rupee in the past nine months. The interest rates have spiked, and inflation has risen from 3.6% to over 9%. At the same time, the prices of essential commodities have increased by 200%.
Did Pakistan really need IMF assistance?
Ishaq Dar: Actually, the current government asked for IMF assistance because its incompetence and a lack of vision caused the economic damage. Just two years ago, Pakistan was praised all over the world for its economic policies.
How did you deal with the issue of Pakistan’s large defense budget? There were reports that the country’s powerful generals demanded that Sharif increase their funding, and his relations with the army turned sour after he refused to do so.
Ishaq Dar: It is a fact that Pakistan is situated in a difficult region and cannot be complacent about its security. Our government always placed importance on national security. We spent a large amount of money to combat terrorism, and our efforts yielded results. But we could only meet the demands of what was available to us. I believe in implementing strict fiscal discipline, and I was supported at the time by Sharif. We didn’t compromise on that.
Parasitic Pakistan Military Budget
It is said that after coming to power, Imran Khan instead of trimming the military budget has reportedly increased it, and that too at the cost of the development fund. Last year, Pakistan spent 1.26 trillion Pakistani rupees ($11bn), about 3.6 percent of its GDP, on its 653,800 troops. It also received $100m in foreign military assistance in 2018. Between 1993 and 2006, more than 20 percent of Pakistan’s annual government expenditure was spent on the military, according to estimates from the Stockholm International Peace Research Institute (SIPRI).
Despite him making tall claims on numerous occasions that he will not go begging to the International Monetary Fund (IMF), he did just that. So, really, is there any difference between this government and the ones that came before. PTI seems to be going back on everything their party stood for. These U-turns are dangerous for the country.
Be it the PM house controversy, Protocol farce or the Austerity measures: Overseas visits, helicopter travel adventures. On the contrary, his Friends are appointed as Advisors and Ministers (Naeemul Haq, Aleem Khan (under investigation by NAB), Awn Chaudhry and Zulfi Bukhari (despite being a British national, as well as under investigation for being in the Panama Leaks scandal and owning offshore properties).
So unless PTI takes drastic steps to improve the situation, people may come out on the streets protesting against false promises and impending price hikes.
And as they say Murphy’s law at its best, it is now known that Pakistan Stock Exchange (PSX) chief executive officer Richard Morin developed differences with the board and submitted his resignation yesterday. His unceremonious ouster further increases problems for the already fractured Pakistani Economy.
28 May 2019/ Tuesday Written By Afsana