Pakistan’s Crippling Financial Crisis
As if the turmoil due to terrorism was not enough for Pakistan, it is facing fresh spate of demonstrations against unprecedented inflation that is putting the already crippling economy out of gear. Inflation is expected to rise to double-digitssoon. The major reason for this has been the steep rise in food and energy prices that has had a cascading effect on the process of other commodities. Pakistan’s imports are increasing and Foreign Exchange reserves have fallen to just about $8 billion; this is just enough for meeting payment obligations for two months. The exchange value of the Pakistani Rupee has fallen to 150 to a US dollar.It has been devalued 20 times during the past three years by about 20%.
Since Pakistan is importing major part of its fuel requirements and many other commodities of daily consumption; steep inflation has led to almost halving the incomes of the people. This has led to large-scale public unrest in the country. Street protests led by Jamaat-e-Islami in Peshawar and other places has targeted the Imran Khan government that had come to power on the promise of jobs, eradication of poverty and the establishment of an Islamic welfare state.
The Pakistan government’s efforts to deal with the situation is not too promising. After securing a bail-out package from the International Monetary Fund (IMF), it has done precious little to convey to the citizens about the grave financial situation of the country. The IMF has agreed to provide $6 billion loan over the next three years but has put in place stringent conditions. Pakistan has to raise its own revenues by 40% in the next budget to meet the IMF conditions. This would mean raising tax rates further and widening the tax base which will put people to more hardship. Financial support from traditional friendly Gulf States like Saudi Arabia and UAE as also China, has not been able to tide over the economic crisis. Although, the Saudis and UAE have promised investments and supply of oil on credit basis over an undisclosed period.
The financial challenges for the country are aggravating as the US has been opposing grant of the IMF loan to Pakistan, which Washington views as a ploy by Islamabad to enable it to repay its loans to China over the China Pakistan Economic Corridor (CPEC). The project as per the US serves, China’s own economic interests. Already, the Imran Khan government has been accused of having mortgaged the country to Beijing and IMF by accepting rigorous regimentation of both.
The Paris based terror-financing watch-dog, Financial Action Task Force (FATF) has placed Pakistan in its ‘grey’ list for its inability to control terror funding by various bodies in Pakistan, who has used, misused and abused the country’s banking system. Thus, Pakistan faces the spectre of being ‘black listed’ by the FATF, this could seriously jeopardize its sputtering economy. It would then be banned from securing financial help from other countries or international institutions.
The IMF after agreeing to the $6 billion bailout has projected Pakistan’s growth at 2.8 % this year, against 5% of Nepal and 7.5% for Bangladesh. India is expected to achieve a GDP growth rate of 7.6% this year according to the IMF. Pakistan thus, is not even in the position of it’s neighbours. The Imran Khan government is clearly in a fix and faces an uphill task to get the economy back on tracks. Nature too, does not seem to be on Pakistan’s side as the drought in the Thar area is continuing for the 4th consecutive year. This has led to low production of food grain in Sindh province.
Pakistan writer and journalist, Imdad zafar says, “it is a self-created turmoil for the country. Over the years, the world has been impressing upon Pakistan to deal firmly with terror outfits and concentrate on bettering its own lot. However, Pakistan was too busy using terrorism as a statecraft, while its agriculture, industry, education and scientific development has taken a back seat.” The irony could not have been sharper!
Script: Ashok Handoo, Political Commentator
Since Pakistan is importing major part of its fuel requirements and many other commodities of daily consumption; steep inflation has led to almost halving the incomes of the people. This has led to large-scale public unrest in the country. Street protests led by Jamaat-e-Islami in Peshawar and other places has targeted the Imran Khan government that had come to power on the promise of jobs, eradication of poverty and the establishment of an Islamic welfare state.
The Pakistan government’s efforts to deal with the situation is not too promising. After securing a bail-out package from the International Monetary Fund (IMF), it has done precious little to convey to the citizens about the grave financial situation of the country. The IMF has agreed to provide $6 billion loan over the next three years but has put in place stringent conditions. Pakistan has to raise its own revenues by 40% in the next budget to meet the IMF conditions. This would mean raising tax rates further and widening the tax base which will put people to more hardship. Financial support from traditional friendly Gulf States like Saudi Arabia and UAE as also China, has not been able to tide over the economic crisis. Although, the Saudis and UAE have promised investments and supply of oil on credit basis over an undisclosed period.
The financial challenges for the country are aggravating as the US has been opposing grant of the IMF loan to Pakistan, which Washington views as a ploy by Islamabad to enable it to repay its loans to China over the China Pakistan Economic Corridor (CPEC). The project as per the US serves, China’s own economic interests. Already, the Imran Khan government has been accused of having mortgaged the country to Beijing and IMF by accepting rigorous regimentation of both.
The Paris based terror-financing watch-dog, Financial Action Task Force (FATF) has placed Pakistan in its ‘grey’ list for its inability to control terror funding by various bodies in Pakistan, who has used, misused and abused the country’s banking system. Thus, Pakistan faces the spectre of being ‘black listed’ by the FATF, this could seriously jeopardize its sputtering economy. It would then be banned from securing financial help from other countries or international institutions.
The IMF after agreeing to the $6 billion bailout has projected Pakistan’s growth at 2.8 % this year, against 5% of Nepal and 7.5% for Bangladesh. India is expected to achieve a GDP growth rate of 7.6% this year according to the IMF. Pakistan thus, is not even in the position of it’s neighbours. The Imran Khan government is clearly in a fix and faces an uphill task to get the economy back on tracks. Nature too, does not seem to be on Pakistan’s side as the drought in the Thar area is continuing for the 4th consecutive year. This has led to low production of food grain in Sindh province.
Pakistan writer and journalist, Imdad zafar says, “it is a self-created turmoil for the country. Over the years, the world has been impressing upon Pakistan to deal firmly with terror outfits and concentrate on bettering its own lot. However, Pakistan was too busy using terrorism as a statecraft, while its agriculture, industry, education and scientific development has taken a back seat.” The irony could not have been sharper!
Script: Ashok Handoo, Political Commentator
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