Home Editorial Editorial: The Never-ending Economic Crisis

Editorial: The Never-ending Economic Crisis

With little appetite for much-needed reforms by any government, Pakistan is unlikely to emerge from its current turmoil anytime soon

by Editorial

File photo. Aamir Qureshi—AFP

It is a cliché to say Pakistan is in economic trouble again when, by all indicators, it has not really prospered for several years. What sets the current crisis apart is that the common man—burdened by persistently high inflation—can no longer stomach the fallout of the “harsh decisions” taken by the government and is increasingly coming out on the roads to protest. In a bid to defuse the anger, the incumbent interim government has forwarded to the International Monetary Fund (IMF) proposals aimed at providing “relief,” with Finance Minister Shamshad Akhtar stressing the country cannot afford any deviations from the ongoing $3 billion standby arrangement or risk losing inflows from bilateral and multilateral donors, including “friendly” nations.

What is abundantly clear from statements of the caretakers is that no subsidies can be provided to consumers burning up their electricity bills in protest. Their “relief” plans, reportedly, seek to protect consumers utilizing less than 400 units of electricity per month by availing a provision for an emergency allocation of Rs. 250 billion in the budget for fiscal year 2023-24. This may not be enough; especially amidst tough IMF conditions the global lender does not want to ease due to a trust deficit arising from repeated past violations.

Under the IMF program, the budget for the ongoing fiscal year calls for a tiny primary surplus by increasing tax collection and undertaking much-needed reforms. At the same time, it aims to protect the vulnerable though the Benazir Income Support Program. However, following the past several years of economic turmoil, the number of people pushed into the list of the vulnerable continues to balloon and an empty kitty lacks the resources to cater to them all. A first step to resolving this situation is reforming taxation by collecting due funds from the agricultural and real estate sectors, and simultaneously fixing transmission networks to reduce line losses and theft. This might not be possible for the interim government, all but ensuring that Pakistan is unlikely to emerge from its current crisis anytime soon.

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