Pakistan is currently going through the most severe economic crisis in its 75-year history, arguably worse than the period of economic sanctions following the 1998 nuclear tests.
Financial experts agree that the free fall of the Pakistani rupee, initiated after the dismissal of Imran Khan’s government in April and the takeover by the PDM alliance, is unprecedented in terms of the devastation it has caused to ordinary people.
Inflation in the country is estimated to be above 25 percent, according to conservative government figures and has put even the basic necessities out of reach of the middle and lower-income classes. The effort to juggle the rising food prices, skyrocketing cost of fuel and increase in electricity bills in a country with a per capita income of only $1,500 has become impossible for many.
The rupee has depreciated more than 30 per cent against the dollar over the past three months. This has resulted in an exponential increase in the external debt servicing requirement, which, at an estimated $15 billion annually, is already a debilitating drain on the country’s foreign exchange reserves. The stock market has lost a significant amount of its value, reflecting the pervading bearish sentiment in the country.
The question remains: is it possible that this entire scenario could have been avoided, or at least mitigated, if strong, sensible economic decisions had been taken in a timely manner, ignoring political expediency? Most experts would answer in the affirmative.
Even though the petroleum subsidies given by the previous government were unjustifiable, there is no denying that delays in making crucial decisions at the helm by the current government has contributed to the economic mess the country finds itself in. The delay in removing the subsidy out of fear of public backlash was one such decision. Equally important is the incomprehensible postponement in the appointment of a new State Bank governor. While the country teeters at the brink of default, the State Bank of Pakistan, instead of trying to control inflation by guiding the monetary policy, is itself floundering like a rudderless ship.
The government is required by law to appoint a State Bank governor within one month of a vacancy, but due to disagreements within its own ranks, has been unable to come to a decision even after two months. Last, the delay in meeting the IMF conditions to raise fuel and electricity charges, in an attempt to avoid rising prices, backfired. The resulting uncertainty and the IMF’s refusal to release the first tranche of funds caused such massive depreciation against the dollar that the country witnessed record inflation.
The future depends entirely on whether all stakeholders in Pakistan’s economic landscape, including the business community and political parties, are willing to put aside their differences and come up with a national economic policy that must be implemented regardless of which party comes to power. This will help ensure continuity, restore the confidence of foreign donors and investors, and bring some semblance of hope to a populace in distress.
Whether our leaders will be able to bury their egos and personal agendas long enough to come together and make tough decisions for their people remains a billion-dollar question. It is, after all, the ability to make bold, controversial, but well-thought-out, decisions in times of crises that is the true measure of a real leader.
The writer is a freelance contributor.