The economy of Pakistan undoubtedly is in the grip of an unprecedented nosedive coupled with unbearable inflation which is making the lives of the poor masses extremely hard. But the dilemma is that the managers of the economy have no quick-fix solution to mitigate the sufferings of the lower strata of society. To stem the rot there is no choice left with the government except to agree to the dictates of the IMF for the ninth review for the release of $ 1.1 billion of the $6 billion bail-out package. Though late the government has rightly decided to accept all the conditions set forth by IMF because assistance promised by friendly countries and likely loans from international lending agencies vitally needed to revive the economy is linked to IMF completing the ninth review with Pakistan. A few days back as part of the implementation of IMF conditions the government uncapped the rupee parity rate with the dollar allowing market forces to determine its real value which has led to an unprecedented devaluation of the Pakistani currency. The price of petrol has also been hiked by Rs.35 per litre which has given a further fillip to the hydra-headed inflation.
The IMF delegation is already in Islamabad for negotiations with the government for the ninth review. The remaining points of difference include a hike in gas and electricity prices and the imposition of new taxes to finance any unfunded subsidies or unforeseen expenditures. In case of successful negotiations with the IMF, the government will have to enhance rates of electricity by 20 percent, gas by 50 percent and petrol between 15-20 percent. Consequently, inflation will climb to 35 percent. Re-joining the IMF programme is an inevitable reality. The country can no more afford political expenses taking precedence over stemming the economic downfall. To be honest, providing gas and electricity to the people below the cost prices might be a good populous ploy but it is not sustainable over a long period of time without putting strain on the economy.
It is indeed regrettable to note that PTI which signed the deal with IMF committing to implementation of all the terms of the deal prescribed by the latter and at the fag-end of its rule wriggled out of its pledge to laying land mines for the PDM government which was a disgraceful act, is now having a swipe at it for putting the IMF programme back on track. It is extremely hypocritical, to say the least. If the PTI government would be still ruling the roost, it would also have to do the same. The aggravation of economic melt-down is also a sequel to political instability fomented by the PTI. Even if Pakistan gets the IMF bail-out the country cannot move forward without political normalcy. Unfortunately, there is no magic wand available to fix the economic aberrations within a short span of time. The people therefore must brace for the new hit to their purchasing power.
What the country is confronted with today, is also a cumulative effect of the failure of successive governments to adopt rational economic policies to put the economy on the path of sustained economic development and also the impact of the global economic environment. They all have relied on loans and grants from bilateral and multilateral sources to keep the economy floating. To the chagrin of developing countries like Pakistan the global economic environment, which also has a profound impact on the economies of developing countries, is also not very encouraging. The World Economic Forum (WEF) has predicted in the 18th Edition of its Global Risks Report 2023 that the cost of living will dominate global risks in the next two years, while climate action failure will continue to haunt the planet’s residents for the next decade. The report has highlighted multiple areas where the world is at a critical inflection point, opining that as the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks.
The trade war between US and China is already casting its ugly shadow on the economy of the world and in case of any likely conflict between the two, the global economy is sure to get a big hit with all its debilitating consequences for the developed as well as developing countries, more so the latter. The global economic growth is projected at 2.9 percent and the IMF has also downgraded Pakistan’s GDP growth from 3.5 to 2 percent. It all boils down to the fact that there are difficult times ahead for Pakistan and the government in the saddle will have to take some tough decisions irrespective of the political cost. However, while taking these decisions it should ensure that the maximum burden is put on segments of society that are rich and can easily share this responsibility. The masses also need to understand the ground realities and not be misled by the false promises and claims of the demagogues who are trying to rub in the notion that the solution to all economic ills lies in immediate elections.