The economy of Pakistan remains in grave peril as even PML-N’s Maestro Finance Minister Ishaq Dar couldn’t put it back on track. With the foreign exchange reserves falling every day and the default risk increasing, the default seems imminent. Meanwhile, Ishaq Dar’s plan for saving Pakistan from bankruptcy hinges on the expectation that Saudi Arabia and China will beef up the forex reserves in Pakistan by the end of January.
Pakistan is also currently in an Extended Fund Facility (EFF) program of IMF, which started in 2019. However, even the IMF program seems to be failing to save Pakistan from defaulting despite harsh conditions set out by the international lender before releasing each tranche of the $6bn bailout package.
On the other hand, inflation remains sky-high, affecting the financial stability of millions of people. For the month of December, inflation clocked in at 24.5 percent on a year-on-year (YoY) basis. The figure has remained above 20 percent for the last seven months. Despite the perilous state of economic affairs as indicated by the fast-depleting foreign exchange reserves and the sky-rocketing inflation, Finance Minister Ishaq Dar is hopeful that the situation will be much better by the end of the ongoing fiscal year.
The unstable economy of Pakistan has also adversely affected industrial units in the country. The brunt faced by the industry is evident in the sporadic shutting down of automobile manufacturers such as the Indus Motor Company and Millat Tractor. Similarly, the textile industry—the backbone of Pakistan’s industrial economy—is also in shambles as numerous textile mills reduced their production, besides several others closing down. The situation of other industries such as cement and mobile is not stable either. The looming threat of the closure of the mobile phone industry threatens livelihood of 40000 people associated with the industry. Meanwhile, the government seems to be unbothered by the economic woes faced by the various industries.
Dark economic future ahead?
In a desperate attempt to save on fuel and energy bills, the federal cabinet approved immediate enforcement of the Energy Conservation Plan on January 03, 2022. According to the plan, shopping malls and markets are bound to close by 8:30, whereas the restaurants will be shut down by 10 pm. The move is estimated to save the nation around 62 billion rupees annually.
Furthermore, Prime Minister Shehbaz Sharif has directed the departments of federal government to reduce their electricity consumption by 30 percent. The Energy Conservation Plan, also includes such microscopic measures as stopping the production of inefficient electric fans by July 01. “A drowning man will clutch at a straw” seems an appropriate idiom to describe the Energy Conservation Plan. Nevertheless, such actions as stopping the production of inefficient electric fans are micro steps in the right direction.
Meanwhile, Pakistan Tehreek-e-Insaaf (PTI) seems hopeless about the economy as it issued a white paper on the state of Pakistan’s economy. The paper compares the economic indicators of Pakistan during PMLN’s government from 2013-18, PTI’s government from 2018-2022, and the incumbent government of PDM.
According to PTI, there are two ways ahead; one is that the IMF program is restarted with tough new conditions on revenue and exchange rates, or the country defaults by not agreeing to IMF conditions. The paper concludes that in both cases inflation, unemployment, and poverty will rise to new highs.