Pakistan is showing clear signs of economic meltdown amid deepening political uncertainty in the country, with opposition politicians pleading for a “financial emergency” to be declared and the military publicly calling for fiscal discipline and tax reforms to create a “viable balance between economy and security.”
The co-chairman of the Pakistan People’s Party (PPP), Asif Ali Zardari, called last week for a “financial emergency” to be declared in order for a plan to be drawn up to boost exports, contain imports and stabilize the Pakistani rupee to steer the country out of the present economic quagmire.
“The economy lies on the ventilator and needs extraordinary measures on an emergency basis to put a hold on the further erosion,” Senator Saleem Mandviwalla, Chairman of the Senate Standing Committee on Finance, told Asia Times on Thursday. He said that in everything from the country’s balance of payment position to its exports, exposure to foreign debt, reserves and remittances the picture was dire.
The country does have a provision to call a “financial emergency” in its constitution. Article 235 empowers the president to proclaim one if the economic life, financial stability or credit of the country is threatened, allowing “financial propriety” to be restored in the interests of financial stability. Measures may include the reduction of the salaries and allowances of all or any class of persons serving in connection with the affairs of a Federation or Province.
With a view to cutting Pakistan’s whopping imports of US$53 billion (as at the close of the fiscal year 2016-17), the government hiked regulatory duties by up to 350% on hundreds of items. This was the third hike since 2015.
The measure may generate some additional revenue for the public coffers but is unlikely to make a dent in the bulging import bill, which is skewering the country’s balance of payments position. Pakistan’s current account deficit is projected at US$12.1 billion, with a trade deficit of US$32.4 billion due to a sharp increase in imports and plummeting exports, which dropped to US$20.8 billion in the last financial year.
The World Bank predicted earlier this month that Pakistan will need an additional US$17 billion by 2018 to service its rising current account deficit and debt payments. “Pakistan is facing headwinds in the external sector and a rising fiscal deficit,” the Bank said, at the conclusion of talks with a visiting Pakistani delegation. A committee of senior bureaucrats had been constituted for the visit following the World Bank’s refusal to deal with finance minister Ishaq Dar, who has been indicted by an accountability court in an unexplained assets case.
“There is a dearth of supply. Stockists are demanding much higher prices for stuff and buyers prefer to stay away. We are right in the middle of a slump in the market”
In an unprecedented move which will have done nothing to soothe military-civilian friction in the country, the Pakistani military’s media wing, Inter-Services Public Relations (ISPR), and the Federation of Pakistan Chamber of Commerce & Industry (FPCCI), arranged a joint seminar on the “Interplay of Economy and Security” in Karachi on October 11.
In his keynote address, the Chief of Army Staff (COAS) Gen Qamar Javed Bajwa emphasized the need for an expansion of the tax base, financial discipline, and continuity in economic policies. “Growth has picked up but the debts are sky high; infrastructure and energy have improved considerably but the current account balance is not in our favor,” he remarked.
Meanwhile, the Pakistani rupee has been tumbling, pushing the prices of essential commodities in the market up by 30 to 100%, with prices for dairy and agricultural products heading beyond the reach of low-income groups.
“There is a dearth of supply. Stockists are demanding much higher prices for stuff and buyers prefer to stay away. We are right in the middle of a slump in the market,” Abdul Rehaman, a vendor at Peshawar vegetable market told Asia Times.