The Pakistani government wants to go to the polls with a new image, a new mindset, and a sense of providing public amenities, for which they have brought in Ishaq Dar as an economic messiah. Ishaq Dar is unlikely to perform any miracles to save the deteriorating economy. The current polarized political environment and growing pressure from the opposition have further complicated the situation.
At present, the main priorities of the country are dealing with the problems of the 30 million people who are affected by floods, and food is a big problem. The biggest inattention of the leadership of Muslim League-N is that it did not think that Pakistan is currently a victim of Western foreign conspiracies at the global level and there are some countries in the region who want to end the American supremacy in Asia, and they have made India the chaudri of this region against China.
Launching Ishaq Dar as an economic messiah in the current situation is another big mistake of PML-N because Ishaq Dar knows how to control the regulatory bodies including State Bank to reduce the dollar rate. But the change in the State Bank’s regulatory structure over the past year, which includes a provision by the IMF that the exchange rate must be subject to the financial situation on the ground, Ishaq Dar, who in the past manipulated the exchange rate to the dollar feel difficulty and achieving old tactics to control the dollar rate.
The best solution to control the dollar is to boost exports and increase foreign remittances and in both sectors, Dar has no strategic approach to operate in the financial spread. The way they have been controlling it is no longer possible, it is possible that the rate of the dollar will be lower at the global level initially, but due to inflation and economic crisis, this is not possible anymore.
In the current economic and political climate, the challenges for Ishaq Dar are formidable. These include current account deficit, trade deficit, debt repayment, high inflation, and rupee-dollar parity to turn around an ailing economy within a few months – before the next election. However, the biggest problem is the economic acceleration is political stability as it is the mother of all economic evils, so it will have to be dealt with. The present government is engrossed in its politics of rescue and revenge and the government does not seem serious about mobilizing its resources fully and these are the priorities of the flood victims.
Under these circumstances, how can we expect the international community to respond to our appeal for cooperation in dealing with this disaster? This makes it very difficult for the ruling party and the government to regain their ‘lost political capital’.The government faces a difficult situation as it has to pay $21 billion to international creditors to service external debt during the next fiscal year.
If timely policy measures and corrective policy measures are not implemented, the country may face default and crisis like in Sri Lanka where inflation. It will have far-reaching effects on growth and employment and affect the poor and vulnerable sections of the population. Pakistan has launched 22 IMF programs in the past and IMF policies and programs have not proved to be a panacea to deal with the country’s economic woes.
It is noteworthy that most of our economic problems have spread over the last 15 years as the country has maintained a high budget and high current account. Unfortunately, these deficits have been met by borrowing from abroad, which has increased the country’s debt burden. A country with nuclear capability is now facing an import-export dilemma due to inappropriate macroeconomic expansion policies, high government expenditure, losses of state-owned enterprises, untargeted subsidies, and the import-oriented fiscal policy of the government.
Although the new government has taken steps to remove subsidies on petroleum products and ban the import of non-essential goods, it is imperative to restore the confidence of the people if the country is to avoid an economic crisis. But first, Pakistan needs to resume IMF funding by implementing economic reforms to restore its credibility in the markets along with the continuation of CPEC financing.
Reforms to reduce high trade and current account deficits will require major cuts in spending and imports, but without adversely affecting the cost of living of low-income families who have suffered from persistently high inflation over the past few years. They have become miserable because of this. The government’s economic reform program must include halving fiscal and current account deficits by cutting the fiscal deficit by Rs 2,000 billion and non-essential imports by $10 billion over the next one year.
First, through tax and credit policies, we must curb the development of highly import-dependent industries (cars, luxury goods, electronics, etc.) for the domestic market. Second, to declare all export industries as tax-free manufacturing units, and ensure all facilities are provided to them at regionally competitive prices and subsidized credit. Bangladesh has thus increased its exports to 45 billion dollars.
The gap between expectations and actual economic performance can be explained by many factors but constraints imposed by the global environment including IMF conditions, failure of our key economic institutions to implement policies, and unexpected external developments. There are basic factors. Severe power outages in Pakistan, current petrol rates, lack of education among children, increase in polio cases, and increasing all these problems are harming Pakistan.
A country with nuclear capability that is ruled under American Policies is facing an import-export dilemma due to inappropriate macroeconomic expansion policies, high government expenditure, losses of state-owned enterprises, untargeted subsidies, the import-oriented fiscal policy of the government, and non-confidence of the public in the majority as people want to see a sovereign Pakistan
