Daily Times

The election frenzy is not yet over, and February is turning out to be a defining month for Pakistan’s politics and economy. From pre-pole rigging to post-election meddling, Pakistan’s General Elections were marked by overwhelming public response, international media criticism of historic rigging and national outcries of stolen mandates. Amidst this political chaos, we must understand the economic implications of General Elections for Pakistan.

With so much effort put into election engineering, it is time for the leadership’s economic engineering skills to be tested. One thing that the election results have further cemented is that Pakistan stands divided on so many critical issues whether social, moral or economic. Therefore, the hopes of the so-called “unity government” declined further. This is especially true in the light of statements from the IMF and the US emphasizing only dealing with the newly formed government. Without IMF financing, Pakistan’s finances are expected to collapse as a survey result by Bloomberg revealed. Therefore, the new government will need to secure a better IMF deal knowing that the international money lender body will not succumb to any pressure tactic. The best the unity government can do is only to pretend to be in control of the situation.

Without IMF financing, Pakistan’s finances are expected to collapse.

The new government will also have to convince the international community to be the true representatives of the people and committed to economic reforms. Representing a population of 241 million with an estimated 40 percent living under the poverty line and inflation skyrocketing to 30 percent, winning the trust of the international business community will be particularly challenging. not to mention that more than 70 percent of Pakistanis believe that the economic conditions of the country are deteriorating. Rightly so, the interim government borrowed a staggering 4 trillion rupees from banks amidst the looming debt crisis of $24bn of external debt obligations due by June 2024 (as reported by the central bank).

The interim government claims the borrowings are against the rising expenses that were unavoidable. Taking the excuses at face value this only means that the new government will have to take significant unpopular steps meaning discontinuation of subsidies on gas and petroleum, the exchange rate cannot be manipulated, and a strict focus on expense reduction and balancing the budget deficit. This also means that Pakistan needs to develop and diversify its industries targeting market fundamentals of potential economies, and revisit its regional and bilateral free trade agreements to improve the trade balance and achieve sustainable economic development. The success of the new government in stabilizing Pakistan’s economy and gaining the trust of the international community will depend on its ability to implement effective economic reforms – an area that the country’s leadership and economic strategists have lacked in particular.

The continued political instability and divide must be buried in the name of greater economic stability and progress. This is to further reinforce that the $340 billion economy is in no position to withstand the effects of the political divide and populist decisions. I have always proposed a technocratic setup for key ministerial positions that must be allowed to operate for a long-term economic agenda. This also means throwing Dar’s fake and ineffective economic policies out the window and adopting a more pragmatic and evidence-based approach to economic management. One of the major economic focus must be on the development of a skilled workforce and investment in education and innovation to drive productivity and competitiveness. The best approach to do this is by promoting entrepreneurial opportunities within the SME industry. The idea must be to engage the 44 percent of the population which is under the age of 35 years in the country.

To boost economic activity in Pakistan, the new government must prioritize several crucial steps. First and foremost, the government needs to focus on fiscal discipline and fiscal reforms. This includes reducing government expenditure, restructuring subsidies on gas and petroleum, and working towards balancing the budget deficit. Additionally, the exchange rate should be allowed to fluctuate according to market conditions to ensure a stable and competitive currency.

Furthermore, Pakistan needs to diversify its industries and exports to target potential economies and improve trade balances. Revisiting regional and bilateral free trade agreements will be essential to achieve sustainable economic development and enhance the country’s global trade relations.

These may not seem to be the big, bold steps that the politicians aspire but since Pakistan is not in the driving seat and being dictated by IMF, we must focus on reformative action that allows the country to garner international and national support. However, all this will only be a blueprint until the country’s decision-makers stand divided on its politics and economics. Without a unified and stable political system, it will be difficult to implement and sustain these economic reforms.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.