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Editorial: Pakistan’s Economic Crisis

The country’s perilous economy, and not Imran Khan, is the real problem facing Islamabad today

by Editorial

File photo of P.M. Sharif speaking with media in London

Prime Minister Shehbaz Sharif may be relieved that PTI chief Imran Khan’s political future appears uncertain after the May 9 riots that have seen an exodus from the party, but his real problem—the economy—remains in doldrums, with no ‘saviors’ on the horizon. Admittedly, it is unfair to solely blame the incumbent government for the crisis, as Pakistan has recorded a steadily poor performance for several years, especially when compared to its regional neighbors. Over the past 25 years, the country has roughly doubled its debt every five years, starting at Rs. 3.06 trillion at the beginning of Gen. Musharraf’s regime in 1999 and hitting Rs. 62.5 trillion at the ouster of Khan last year. Rampant inflation, coupled with stagnant wages and a consistently devalued currency, has disproportionately affected the impoverished, impacting human development.

Increasingly an import-based economy, Pakistan’s bad economic performance has chipped away at its foreign exchange reserves, currently at $4.19 billion, barely sufficient for a month of imports. With “lender of last resort” IMF refusing to play ball, more trouble is expected as Pakistan grapples with political instability, especially as the government gears up for elections due later this year amidst economic pain that voters are unlikely to forgive.

Incumbent Ishaq Dar is the second finance minister appointed by P.M. Sharif—reportedly at the urging of his elder brother Nawaz Sharif—in a year of government, with predecessor Miftah Ismail replaced because his pragmatism was not conducive to popular support. Unfortunately, Dar has fared no better, especially amidst the IMF’s repeated amendments to “prior actions” required to unlock a $1.1 billion tranche of a $6.5 billion bailout program. To avert default, Pakistan has curbed imports and voided subsidies, triggering further inflation. The government, understandably, lays the blame on the PTI that ruled for three-and-a-half years before its ouster and increased the budget deficit from $1,600 billion to $3,500 billion. But the time for blame is done. What’s needed is a solution even though salvage is nowhere in sight.

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