The year 2024 emanates with a stark reminder that in the ongoing fiscal year (2023-24), Pakistan has to make around $22 billion debt payments on external loans. It is not known how Pakistan would service the debt payment, but it is known that Pakistan would have to do it to avoid sovereign default.
Pakistan is an interesting country to study. On June 9, 2023, Pakistan’s Finance Minister Ishaq Dar unveiled the annual budget for 2023-24 on the floor of the National Assembly and announced the budget amounting to 14.4 trillion rupee (around $50.5 billion), half of which would be set aside to service Rs 7.3 trillion of debt. Pakistan was left with the rest of Rs 7.1 trillion to run its affairs.
The budget declared that the inflation target would be 21 percent. Unfortunately, ground realities do not listen to budgetary avowals. From August 2023, inflation began rising from 27 percent to reach 31 percent in September 2023. In December 2023, measured by the Consumer Price Index, inflation remained around 29 percent compared to inflation in December 2022, as per the data of the Pakistan Bureau of Statistics (PBS). This is still a modest declaration. Inflation is escalating. The escalators are the continuous rise in fuel and energy prices. The prices are kept on rising, so is inflation.
Tragic Blaze The PBS revels in comparing prices of commodities in a given month with those of the past month or year. This is where the PBS tends to lose touch with reality. Currently, in Lahore, the retail price of a broiler egg is around Rs 28. A dozen eggs cost Rs 336. The price of a kilo meat of a broiler chicken is around Rs 1000. The price of a liter of fresh full milk of cow ranges from Rs 170 to 250. Eggs, meat and milk are animal sources of protein, necessary for growing children and aging adults. In this way, an average growing child requires food, costing from Rs 200 to 300 a day. For one month, the total cost is from Rs 6000 to 9000 for a child. The irony is that the aforementioned rates are rampant in a country which is primarily an agriculture one, but which is fast losing its agriculture land to housing schemes. The end-sufferers are the poor, who can buy neither sufficient food to eat nor a plot in any housing scheme to live.
At the height of the economic crisis engulfing Pakistan, the budget (2023- 24) supported non-development expenditures. For instance, defence spending was increased by 15.5 percent. The last fiscal year allocation was Rs 1.5 trillion which was risen to Rs. 1.8 trillion this fiscal year, making up defence budget about 1.7 % of the GDP. Similarly, salaries of civil servants were raised up to 35 percent. Moreover, pensions of retired government servants were increased to 17.5 percent. Certainly, this was a wheedling budget – dissociated from ground realities – meant for strengthening the strong, but falling hard on the inflationstricken citizens. This was an act of injustice. Ills of the budget incongruent with ground realities are getting obvious. An undue rise in expenditures is solidifying the begging bowl. Retrospectively, non-development expenditures of all hues could have been avoided for the sake of the poor.
Variant Alert Against this background, Pakistan negotiated a deal with the International Monetary Fund (IMF) to seek a bailout package of $3 billion in order to avoid sovereign default. Interestingly, to placate the IMF, Pakistan secured $3.7 billion from Saudi Arabia and the United Arab Emirates and a roll-over loan of around $4 billion from China. This is how Pakistan is running its financial affairs. The crutches of Pakistan’s economic stability are foreign. The IMF offers the supra-crutch. On January 11, 2024, for the release of the second tranche of $700 million, the board meeting of the IMF is due.
Woefully, Pakistan has deployed more methods how to spend money and secure loans than the methods how to earn money to survive honourably. On the one hand, Pakistan has been trying to avoid sovereign default; on the other hand, Pakistan is reluctant to limit its non-development expenditures.
Between the two poles hard pressed are the poor who have no choice but to bear the brunt of expenditures. A delusion seems to drive Pakistan crazy: A windfall is possible. Pakistan has been inviting the Middle Eastern countries, claiming to have friendship with Pakistan, to take interest in corporate farming, but these Arab countries still lack expertise and interest in agriculture, though they are interested in a consolidate food security of the Gulf States.
Rising Pakistan China has been opening its land to corporate farming, after having practised collective farming for decades. In 2016, China declared a policy of promoting and standardising the transfer of the right to use farmland from rural residents to commercial entities. China is inviting international investors to do commercial farming. For any foreign investor interested in corporate farming, which is the better destination, Pakistan has to think about it.
Just under the assumption of securing foreign investment, Pakistan has been wasting time. Signing any Memorandum of Understanding has little practical value. Pakistan has to devise an industrial policy: a policy to promote an indigenous small scale export industry. The youth who are buying the services of human traffickers to shift them to Europe can be encouraged to install small industrial units from the same money in their localities to do export and earn foreign exchange. The government should offer subsidised practical assistance. Pakistan’s preference should be of self-reliance.
Dowry shadows Dr Qaisar Rashid T
he writer is a freelance columnist. He can be reached at qaisarrashid@ yahoo.com
Economic Whirls
53
3
08.01.2024
The year 2024 emanates with a stark reminder that in the ongoing fiscal year (2023-24), Pakistan has to make around $22 billion debt payments on external loans. It is not known how Pakistan would service the debt payment, but it is known that Pakistan would have to do it to avoid sovereign default.
Pakistan is an interesting country to study. On June 9, 2023, Pakistan’s Finance Minister Ishaq Dar unveiled the annual budget for 2023-24 on the floor of the National Assembly and announced the budget amounting to 14.4 trillion rupee (around $50.5 billion), half of which would be set aside to service Rs 7.3 trillion of debt. Pakistan was left with the rest of Rs 7.1 trillion to run its affairs.
The budget declared that the inflation target would be 21 percent. Unfortunately, ground realities do not listen to budgetary avowals. From August 2023, inflation began rising from 27 percent to reach 31 percent in September 2023. In December 2023, measured by the Consumer Price Index, inflation remained around 29 percent compared to inflation in December 2022, as per the data of the Pakistan Bureau of Statistics (PBS). This is still a modest declaration. Inflation is escalating. The escalators are the continuous rise in fuel and energy prices. The prices are kept on rising, so is inflation.
Tragic Blaze The PBS revels in comparing prices of commodities in a given month with those of the past month or year. This is where........
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