The worst fears of economic managers and policymakers has come true. The US dollar has crossed the psychological barrier of Rs200 in the open market on account of the dismal economic conditions and lack of funds.
Ever since the coalition government took over, the rupee has lost Rs11.4 or 6.2 percent of its value. Yet the prime minister has been footdragging on taking tough economic decisions, knowing well the political costs of such moves. The failure to reign in the runaway dollar can have severe consequences for the economy.
The IMF has resumed talks with Pakistani officials over the release of crucial funds which have been stalled by concerns about the pace of economic reforms. A major sticking point will be over costly fuel and power subsidies which the previous government announced. Now they will have to convince the IMF that the subsidies are important for political stability.
Pakistan has repeatedly sought international support for its economy hit by crippling national debt, galloping inflation, and plummeting rupee. The current account deficit has surged over rising imports and slower export growth. Petroleum import bill has increased a staggering 95.84% to $17.03 billion in this fiscal year, while foreign reserves have dropped to $10.3m the lowest since Jan 2020.
Still Pakistan will be seeking to extend the IMF programme till June 2023 and receive the next tranche of $1 billion soon. The main focus lies on presenting the next budget. The government will find ways to expunge the figures to jumpstart the moribund economy. However, the fragile government is still unwilling to take tough economic decisions or bring reforms.
Pakistan is facing a national emergency to solve its economic issues and avoid a Sri Lanka-style default. It is imperative to revisit the economic policy agenda so that we don’t face another crisis every few years. We need to end our misplaced priorities and prepare for difficult choices. However, it seems the short-lived government is unlikely to take such decisions and continue exacting a heavy choice on people.
