LAHORE: A few weeks before schools across the country were expected to close for summer holidays, Farhana Sattar, a kindergarten teacher at a local private school in Lahore, received her termination notice. Sattar had over 25 years of experience teaching, but she was let go because the school did not want to pay her salary for the summer months.
Pakistan’s economy is in a deep crisis, and the common people are likely to bear the brunt of it. The country is facing high inflation, a depreciating currency, and a shrinking economy. The government has implemented austerity measures in an attempt to keep the situation under control, but these measures are having a negative impact on the lives of ordinary people.
Sattar’s story is not unique. Thousands of schoolteachers across the country were fired right before summer holidays this year. The mounting rate of unemployment, projected rate of inflation, and further devaluation of the rupee in the coming months are expected to only make things worse for the salaried classes and daily wage workers.
The State Bank of Pakistan’s half-year report on the state of the economy, released in May this year, raised alarm bells across the country. The report stated that in the first half of the fiscal year, macroeconomic conditions deteriorated despite policies instituted by the finance minister to improve the external current account and primary fiscal balance.
The report highlighted the role of a global recession and choked international supply chains, along with foreign reserves enough only to purchase imports for two weeks. The country is yet to completely recover its losses from floods last year in which about 40% of land was inundated, and as this year’s Monsoon season approaches, there is fear of further fallout.
As a result, the State Bank reports, the agricultural sector and the large-scale manufacturing both contracted leading to multi-decade high inflation in many sectors, especially wheat and other food items. The report adds that speculation around flood-induced supply shortage drove overall inflation and deteriorated the commodity import outlook. On top of that, rupee depreciation and increase in power tariffs and fuel costs added to the overall inflationary pressure on the economy.
The grim outlook for the economy has led the sitting government to address these challenges. As inflation is expected to peak this coming month at around 34-36 per cent, the only hope the Ministry of Finance has offered thus far is that prices may go down following a decrease in international commodity prices.
The ministry hopes that a global decrease in commodity prices could offset the losses from rupee depreciation. So far, flood rehabilitation activities and debt re-servicing remain the main sources of expenditure for the government that has also undertaken intensive austerity measures in order to keep petrol prices at bay.
In response to the policies instituted to keep the prices of petrol commodities stable, noted economist Atif Mian tweeted that cutting GDP to sell cheap petrol ‘Will make it more difficult to pay off the debt, leading to more devaluation, more misery, and higher petrol prices in terms of purchasing power.’
Unsurprisingly, many analysts have compared Pakistan’s economy to that of Sri Lanka and Ghana both of which defaulted on their payments. They also noted that both countries have performed better due to restructuring of the economy under IMF and World Bank directions. They have suggested the same for Pakistan along with holding elections without delay in order to improve political instability and investment outlook for the country.
Over the last month, especially due to internet outages in many parts of the country because of protests and general unrest, many startups and emerging businesses reported losing investments because of the grim reputation Pakistan holds regarding its political outlook.
The State Bank of Pakistan’s report as well as the analyses shared by top economists could be understating the impact of the economy on the average person. There are reports indicating a sharp increase in the undocumented economy, as well as widespread unemployment.
In the same school where Sattar was furloughed from, sanitation workers were also let go off around the same time and for the same reason. As summer months approach and with them increased electricity rates and possible flood predictions, it is yet to be seen how the common person in Pakistan will fare. The outlook appears grim.
Common people are going to bear the brunt of crises going in Pakistan’s economy. It is a serious problem, and it is likely to have a negative impact on the lives of ordinary people. The government needs to take urgent steps to address the crisis and to protect the common people from its effects.