Will elections bring Pakistan's economy out of crisis?

Pakistani voters voted last Thursday amid the country's ongoing deep economic crisis, the most notable features of which are an inflation rate of nearly 30%, nearly 40% of the population living below the poverty line, and the ratio of Rs. The percentage of public debt to GDP increased to 72%.

The next government is expected to address these challenges and work to solve them, which includes developing the existing dilapidated infrastructure in many areas of the country, be it roads, means of communication, electricity and Be at the level of water services and sewage drainage.

One of the challenges facing Pakistan is energy provision, which has weakened the country's growth prospects and efforts to shift its export base away from low value-added products like cotton and rice and focus on high-value commodities. Has been banned.

One of the major problems that Pakistan faced came in late 2022, as seasonal floods led to the displacement of about 8 million people and losses of more than $30 billion, due to the loss of the cotton crop in the country. Destruction occurred. Textile industry, which is a major source of exports. There is every possibility that the growth rate will turn negative in 2023.

Pakistan, which imports a large amount of its food and fuel needs, continues to record huge trade deficit.

Shahbaz Rane, economic analyst at The Express Tribune and anchor at The Express News
Shahbaz Rana focuses on Pakistan's external debt crisis, which exceeds $128 billion (Al Jazeera)

suffocating crisis

In light of this, Shahbaz Rana, economic analyst of The Express Tribune newspaper and broadcaster of The Express News, says that the most important food items that Pakistan imports are edible oils and legumes, and the annual bill for imported food is between Is. 6 and 8 billion dollars.

He said in an interview with Al Jazeera Net that Pakistan is facing a serious crisis due to the amount of foreign debt, which is more than $128 billion, and the general budget is being exhausted with debt service.

Due to rising commodity prices – many of which are imported – foreign exchange reserves fell to less than a month of imports last May, leading to shortages of vital commodities.

Last June, Islamabad escaped default after receiving a $3 billion loan from the International Monetary Fund. However, the loan package from the fund came with strict conditions and reforms that would directly affect the conditions of the public.

As part of the deal, the government agreed to impose new taxes on the struggling energy sector and cut utility subsidies, which led to sharp increases in electricity and petroleum prices that hit poor households especially hard. .

Inflation – which reached nearly 30% in December – has been rising since the beginning of last year after Pakistan's Central Bank agreed to liberalize the local currency's exchange rate as part of an ongoing currency fund programme.

Once the exchange rate liberalized, the value of the currency declined rapidly in recent months, currently standing at Rs 279 per dollar.

The Pakistani rupee fell nearly 20% against the dollar in 2023, and the rupee is expected to continue falling slightly, increasing Pakistan's current account deficit as goods coming from abroad become more expensive. To Rana.

In recent months, the official unemployment rate has risen to a record high of 8.5%, meaning 8 to 9 million people are falling into poverty.

(2:08 pm) Shahar Al-Ahmad Arif Kayani works as an accountant in the private sector in Islamabad (Photo by Shahar Al-Ahmad)
Arif Kayani said he and his family members are facing a difficult life as the prices of electricity and gasoline continue to rise (Al Jazeera)

road beat

Arif Kayani (53 years), an accountant working in the private sector in Islamabad, says about his living situation that he and his family members are facing a difficult life, especially during the last two years because of electricity and gasoline. The prices are continuing. To rise.

He said that he was considered to have a good income, but with the increase in the inflation rate, his money became half of its real value and his salary was no longer enough to cope with living conditions. What will be the situation for those who are on salary, are weak or are unable to find work to support their families?

He said he participated in the recent elections with the hope that they would form a new government team that would be able to resolve the economic crisis Pakistan has been facing for years.

Taxi driver Shahzad Ali was no less pessimistic than Kayani, as he assured Al Jazeera Net that his work had become worthless in light of the significant increase in the price of gasoline, and his income was barely enough for him and his small family. Was. He, his wife and 3 children.

He said he did not participate in recent elections, believing them to be useless and would not solve the problems facing the country, noting that the next government is often predetermined by the decision-making circles and has There is no improvement programme.

Shakeel Ahmed Rami / Political Economist, Executive Director of the Asian Environmental Civilization Research and Development Institute / Islamabad Photography: Shahar Al-Ahmad
Ramey believes foreign investment is hindered by political instability and bureaucracy (Al Jazeera)

fundamental issues

Economist Shakeel Ahmed Ramai, executive director of the Asian Civilization and Development Research Institute in Islamabad, says Pakistan has been struggling with major issues for a long time, has seen a clear decline in growth rates, and is among the worst performers in tax collection. Is one of the countries.

Speaking to Al Jazeera Net, Ramai said that successive governments had not moved to establish stronger tax laws for fear of harming the commercial interests of major companies or people belonging to controlling families in the country.

He pointed out that the failure of successive governments to increase tax revenues and modernize state-owned companies has led to a persistent increase in fiscal deficit and huge debt.

Ramey pointed out that given that the new government will proceed to obtain another loan from the International Monetary Fund, it will face difficulty in repayment unless new taxes are imposed on agriculture and real estate.

He pointed out in his speech that foreign investment is being hindered by security concerns and political instability in addition to bureaucracy, which prevents foreign investors from investing their money in the country, adding that if the situation improves and the systems are better, Pakistan has many investment opportunities in various sectors. Correction was made.

political crisis

Ramai pointed out that one of the dilemmas facing the Pakistani economy that prevents it from recovering is a political crisis in the light of widespread doubts about the integrity of the elections held on February 8, and “deliberately boycotted and Presently detained.” Despite popularity, Prime Minister Imran Khan and his party Tehreek-e-Insaf got more than 65% of the votes.

If the political contenders – notably the Muslim League Party led by former Prime Minister Nawaz Sharif and the People's Party led by Asif Ali Zardari – resort to forming government coalitions with some other smaller forces, Pakistan's long-awaited economic According to Rame, the reform and privatization program, this will become more difficult.

They concluded that in this case the expectation is that the new administration will choose the old solutions tested over the past three decades, as it will raise energy prices rather than carry out difficult reforms, and thus inflation rates will remain high.

It would also raise electricity and gas prices to address the debt problem rather than address leakage or theft from power lines, and it could continue to tax companies instead of going after the rich – who already pay high fees. Are suffering from.

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