Every time Finance Minister Miftah Ismail addresses an unscheduled press conference, we know a petrol bomb is dropping. After the third hike, the petrol prices have jumped up to an unprecedented Rs 234 per litre. While a part of this government action is to secure an International Monetary Fund (IMF) bail-out, most of it can be attributed to the global economic crisis as well.
External factors, including the Russia-Ukraine war and factory shutdowns in China, are threatening the supply of goods and commodities like oil, resulting in the international crude oil prices going beyond $120 a barrel and edible oil prices increasing by 300-400 per cent. On the other hand, the US central bank announced the highest ever 75 basis point hike in interest rates since 1994 to slow down faster-than-expected inflation. Experts are warning of a recession and this will have a domino effect on economies across the world. This is just the beginning and Pakistan is already in a tight corner.
Meanwhile, to secure an IMF loan, the Pakistani government is bound to take tough decisions and withdraw the petrol subsidy. The previous Imran Khan government had given Rs 120 billion per month subsidy on petroleum products which continued to increase the current account deficit.
However, at this point, Pakistan just cannot afford to subsidise petrol or it will go default. The government says it is helpless but so is the public. The continuous petrol hikes are making it all the more difficult for people to survive in this country.
It is always the people of Pakistan who have to bear the brunt of inconsistent and unthoughtful policies of successive governments.
The effect of an increase in petroleum prices is multidimensional – the rupee deteriorates and inflation reaches new heights.
The production costs for most commodities and utilities increase, making them out of pocket for a common man. Government ministers are asking the public to bear responsibility and reduce their spending but why just the public? Unfortunately, it is always the people of Pakistan who have to bear the brunt of inconsistent and unthoughtful policies of successive governments.
There is little any government does to take the country out of this turmoil for good. Government after government, rulers after rulers, but none of them have really worked on the structural reforms the country has always needed.
Pakistan has come core issues which need urgent addressing or the difficulties will only increase.
As of 2019, the size of Pakistan’s informal economy has been estimated to be around 56 per cent of the country’s GDP and no initiatives are being taken to remove the hurdles in documenting the undocumented economy. Similarly, while governments continue to increase taxes citing various reasons, none have brought tax reforms to expand the tax net or even incentivise the people who file taxes.
The state-owned enterprises are still the white elephant in the room and no government has made a substantial effort to privatise them. There has been no investment in expanding the industrial or agricultural sector.
Local manufacturing remains limited and the already existing ones use imported raw materials which are getting costlier with the upward trend of the dollar.
The IT industry, one of the fastest-growing sectors of Pakistan contributing 1 per cent of GDP, has not received the support it deserves. Pakistan was ranked at 108th position in the Ease of Doing Business Index and has made zero effort to provide a conducive environment to investments and businesses. Around 68 per cent of Pakistan’s population comprises youth but the youth bulge remains ignored and demotivated, resulting in a brain drain.
More and more people want to flee the country, ready to become second-grade citizens in another country in return for a quality life. These issues have always been on the table but with global markets dipping, climate crisis looming, pandemic resurging, energy crisis soaring and political stability lingering, these have been aggravated becoming even difficult to manage.
At the end of the day, it is only the public that suffers while the business and political elite remains unperturbed. More poor will now go below the poverty line, the middle and upper-middle class will struggle with maintaining their current standard of living and the lower middle class will only fall short of being called poor. This will result in more frustration in the society – crime rates will increase and extremism will be uncontrolled. The policymakers driving luxury cars and residing in big bungalows fail to understand the misery of the commoners. However, they must not test the patience of the public beyond their capacity as the eventual backlash can lead to civil unrest, which is going to be death for the already brimming political and economic instability.
It is about time some stringent measures are taken on the part of government and the public to control the expenses, including reducing working days, switching to alternate and renewable sources of energy, energy conservation, reducing perks and privileges of high office holders, and using the allocated budgets smartly.
Above all, we need consistency in policies to restore investors’ confidence. If the government of Pakistan starts today, it will take at least five to ten years to stabilise the economy. But with the election cycle, ugly domestic politics and external pressures, this looks like a pipe dream.
The writer is a freelance journalist. She can be reached at [email protected] and tweets @mahnoorrsheikh.