PAK ECONOMIC CRISIS
When Pakistan found itself in chaos, amid a major economic crisis, it decided to seek help from the United States, and has pledged some “extremely tough” measures. The cash strapped country has held back in terms of finalizing a deal with International Monetary Fund.
This comes before the elections and the country has held back from finalizing a deal with the (IMF) International Monetary Fund, because their demands could usher to an upsurge in the cost of essential items around the nation.
Ishaq Dar; Pakistan’s Finance Minister during a meeting on Wednesday talked to a visiting US delegation to help in persuading the Multilateral lender based in Washington to be sympathetic in restoring the program for Pakistan.
He stated, that the challenges which were created by the external factors and the floods must be understood by the delegation.
Visitors were told by Dar, that Pakistan aims to honor all their International Commitments and would take extremely tough steps to make sure the country gains economic stability.
ISLAMIC REPUBLIC’S PLANS FOR THE ECONOMIC CRISIS
As suggested by the National Austerity Committee, Pakistan is pondering the following steps –
- Natural gas/electricity prices to increase
- Plots allocated to military and civil bureaucrats will be recovered
- MPs salaries will be paid at 15% less
- Discretionary schemes for MPs to be abolished
- Discretionary funding to Intel agencies to be abolished
- Gas/electricity meters turned to be prepaid
- Allowances given along with salary will be done away
- The usage of petrol to be reduced by 30 per cent at all extent
- Ban on foreign visits to be imposed
- A complete ban to be imposed on buying luxury vehicles
WHAT ARE THE DEMANDS OF IMF
Islamabad at present is waiting for the results of an IMF Loan agreement’s ninth review, which was signed by the previous administration.
Pakistan’s unsettled next installment of funding would be released after the evaluation, which has been delayed since September.
Pakistan’s bailout program’s 7th and 8th reviews were approved by the IMF, in August 2022 after being agreed upon in the year 2019, which allowed more than 1.1 billion USD to be released, reported Dawn.
The officials from IMF have indicated that they are ready to continue working with Pak, but first the basic requirements have to be taken care of by the country that IMF has put forward.
In the remaining five months Islamabad will need to get fresh loans of 10 billion USD (February- June), the near-term challenge for Pakistan has escalated swiftly a Geo News report stated.
IMF was sent an SOS (Save Our Soul) to resuscitate the program, which has been held back since last November.
PAK’s RELATIONS WITH NEIGHBOURS
Although the facts on ground are contradictory, but after Pakistan’s PM Shahbaz Sharif offered dialogue with India, the Pak Media took Minister of External Affairs Subramanyam Jaishankar’s bid to his fellow mate Bilawal Zardari for the (SCO) Shanghai Cooperation Organization foreign minister’s meeting in the month of May as a sign to defrost their relation with India.
While in an interview with United Arab Emirates channel, a conditional offer was made by PM Sharif on 17 January, 2023, Jaishankar on 24 December, 2022 sent an invitation letter through diplomatic channels.
In the run-up to the SCO, later this year, all the SCO members are required to be invited and it is India’s duty to do the same, and Jaishankar being the president of SCO in 2023 has to take care of it.
Although the fans of the India-Pak dialogue and the conflict resolution industry in India have painted a familiar picture as their Pakistani counterparts, India’s bilateral stance with Pakistan stands unchanged. The message is easy: To talk and normalize relations, end cross-border terrorism.
The top precedence of the Islamic Republic’s Islamabad is being able to finance debt relief for the troubled nation. As IMF had given Pakistan difficult conditions for loan, Islamabad is approaching Washington to request the Bretton Woods institution to go easy on the Islamic State.
Because their requirements are PM Sharif imposing more taxes to raise revenue, and increase electricity tariffs. All these ruthless steps could be politically disastrous.
Running out of money is not the only thing that has led Pakistan asking for help, they have run out of ideas on how to save the country which is unwinding at an alarming rate.
If only the economy was on the verge of bankruptcy, things for them wouldn’t be so bad. But the polity is pulling the country apart as it is totally polarized, and because of the Taliban the security situation in the country is getting out of hands- along with the economy falling.
There is no clear off-ramp for the current regime as the political-crisis used by Pakistan is worsening every day because one crisis is toughening the other one.
If we talk about it in simple words, Pakistan is neck deep in the troubled waters but Pakistanis seem to think that they can start swimming after the water crosses their heads because they will be helped by the world, but the world is not ready to help Pakistan until and unless Pakistan strives to help themselves.
WHAT IS ITS ELITE DOING?
In this situation one would think that Pakistanis must be concerned about their economic situation and reforming the economic situation but they are more concerned about the political drama in their country.
Plethora of Pakistan’s military personnel, Pakistani elite politicians, civil servants, who captured the resources of the state, got business, gentry and trade organizations- this has led to a point where the economy has touched an all-time low.
The pivot at this point is to try and straighten everything out, back to default, which is bound to lead to the economy unleashing and incinerating in its wake an unimaginable political and civic mess.
Without a doubt the default will lead to uncontrollable pain, and the irredeemable elite from Pakistan is trying their best to terrify the rest of the world to make sure that Pakistan’s economy keeps floating.
They used the floods as a means for bargaining to get the international lenders to be lenient to them, now they’re using the imminent economic collapse as a means for bargaining to get the international lenders to be lenient again.
Pakistan is using the tactic of scaring the world by letting them know that radical Islamists can take over the country in a revolution, or the nuclear weapons can go loose.
Although their tactic is scary, but this coming from Pakistan – is exaggerated as we look at the past. Pakistanis like to romanticize revolution, but they don’t have the courage for any such thing, and an Islamic revolution which will affect the elite privilege in the worst manner.
Although, the economy faces a dead end. If the IMF program comes back on the rails, it will help to postpone the economy going further down for a couple of months, most probably till June 2023, the end of the current financial year.
An amount of around $10 billion over the next six months is needed by Pakistan. With the help of the IMF program, they will only be able to manage to collect this amount with the UAE giving $1 billion, Chinese giving a couple of billion dollars, the Saudis giving around $2 billion, and Qatar buying some assets for approximately $2 billion. But this can only suffice them till June.
Pakistan, will need an amount of more than $30 billion in the next financial year.
Will all the friends helping now keep pouring money into Pakistan continuously?
The IMF is imposing very strict conditions to restore the extended finance facility program. And the result of these strict conditions will be financially devastating for the people and politics.
The inflation is expected to rise up to 40 to 50% because the gas rates, power tariffs and fuel prices will all see a swift hike. In addition to all this the rupee will collapse.
The currency traders state that when the rupee is authorized to levitate; it is bound to depreciate from the artificial level of 230 to approximately 260-270. some analysts have a fear that the Rupee in a few months reach the 300 mark. Which will result in tumultuous inflation which is already arduous.
The cost of doing business will rise to unviable and unsustainable levels as Pakistan will increase interest rates to control inflation. Whatever remains of the government of the fiscal position will be destroyed by the interest rate increase.
Although the current interest rate of 17% is extremely alarming, the entire revenue of the federal government will be covered by the debt returning which will also cross the revenue of the federal government.
The Pak military leadership and politicians have been hoping that this storm will just pass them by. The reality is that Pakistan is bound to straighten everything to the default, and the only option for them when this happens will be to seek a debt rescheduling.
It’s clear that the Pak generals and elite want the rest of the country to be ready to sacrifice but are not ready to cut their own privileges and expenses.
They want their golf courses, royal protocol, holidays in Dubai, and want to send their kids to universities in the West, all the while receiving huge subsidies from the state which is now empty, but saying no to the ordinary citizens of Pakistan, for even the basic right to life.
Pak can no longer afford expensive weapon systems but the Pakistan army is not ready to cut its costs and continues buying these expensive weapon systems. And worse than this they’re continuing with their strategic adventures on borders on both sides which they can’t afford.
Only if the strategic environment betters and the relations with Afghanistan and India are back to normal without any actions and legal conditions the budget for the Pakistan military can be cut.
New Delhi doesn’t feel the need to reciprocate to the tactical moves which only benefit Pakistan and has become wise to Pakistan’s wiles. on the other side Taliban has shown their true colors and it seems like Pakistan’s western borders will continue to remain destabilized and disturbed- The Rawalpindi GHQ.
Just like the military, the political class is interested more in securing its political future and saving its political capital rather than saving the country or its future. When the country is on the verge of crumbling, the jostling in politics is unbelievable.
The ruling combine has nothing left with which it can go to the next elections whereas Imran Khan demands immediate elections which he thinks he will win.
The army wants to keep calling the shots but does not want to disturb democracy- hypocritic. and it does not want Imran Khan to come back to power, not on immediate basis at least, and is ready to stop him at any cost.
For the time being it looks like the government will agree to IMF’s conditions and get back on IMF’s program. Within a month or two, it looks like it will start throwing money to win back its political support.
This means when the next elections come and a new government is elected, by the time they come in power Pakistan will be amid an even worse crisis than it is already in, currently. No matter which way you look at it the Pakistani economy with its current political structure and current state is headed to crumble.