Economic report

The Ministry of Finance, in its monthly review for the month of August, has warned that due to the increase in rates of international commodities and various domestic factors, inflation is likely to continue to rise in Pakistan. The rate of inflation is expected to remain between 7 and 9 percent, which is not good news for the majority of the country’s people that are already struggling with the price hikes in food items needed for daily use. The finance ministry has said that Pakistan will not pull out of the IMF programme for now, but that measures need to be taken to deal with the inflation rate and to tackle it better. Meanwhile, the high level Economic Advisory Council has made more radical suggestions – and certainly radical steps are required to deal with an economy which refuses to show any signs of moving to a time when people can afford at least the basic items of life. The EAC has suggested that Pakistan place a two-year moratorium on acquiring foreign loans. Currently, Pakistan needs to return over $40 billion in foreign loans over the coming two and a half years. This naturally places a huge strain on its own resources and its own finances, leaving behind little room for money that can be used to help alleviate the miseries of people.

More and more experts have been commenting on Pakistan’s economic condition and the possibility that it could continue to suffer under a pandemic that has not yet gone away. The EAC has said that lockdowns which impact trade will further damage the economy. But this is a Catch-22 situation. Pakistan cannot afford an increase of Covid cases, which even now are bringing its health system close to collapse, and yet at the same time it cannot afford a further fall in economic earning and in unemployment levels. In this situation, if it is manageable, a moratorium on further borrowing from outside the country seems sensible as does the proposal that State Bank regulations be revised and amended, where necessary to make them more effective.

The economy and its condition often determines the fate of governments. Certainly, this is true of the PTI government. People everywhere in the country talk of the inflationary pressures they face, with salaries failing to keep up with the rise in the prices of commodities that are used by almost everyone, including fuel and of course food. This is a legacy that the PTI will need to answer questions about as it goes into its next election campaign. The opposition has naturally been critical of the condition of the economy, with Shahbaz Sharif pointing out that the PTI government in three years has pushed 33 percent of people below the poverty line. Pakistan also faces more potential problems in the future, particularly given the Afghanistan situation. The PPP has also attacked the PTI for its failure to better the lot of people and has said its Ehsaas Programme is simply a duplication of the Benazir Income Support Programme without anything to bolster it further. The economic question then for the PTI government is very, very real. How it copes with it may determine its future as well as that of the country.