Our politicians are all focused on who will be the next chief of army staff (COAS). Our politicians are all focused on who will appoint the next COAS. Our politicians are focusing on invading Islamabad. Our politicians are focusing on creating rifts within the army. Our politicians are focusing on creating rifts between Pakistanis and their own army. Red alert: If these focuses continue Pakistan will soon – very soon – be in a state financial emergency.
There are no dollars left in the interbank market. There are no dollars left in the open market either. The SBP’s $8.3 billion is all borrowed reserves. We need $20 billion to buy petrol and diesel. We need a billion dollars to buy wheat. We need $3 billion to buy cooking oil. We need $2 billion to buy coal to run our power plants. We need $3 billion to buy LNG. We need $2 billion to buy cotton. We need $10 billion to import machinery. Red alert: If our imports continue the way they are, Pakistan will soon – very soon – be in a state financial emergency.
We need $17 billion to fill our current account deficit. We need $17 billion for debt servicing. We are running a $50 billion trade deficit. We are running a Rs6 trillion budget deficit. We have a Rs2.5 trillion circular debt. Our so-called Public Sector Enterprises (PSEs) are indebted to the tune of Rs2 trillion. The government’s so-called ‘commodity operations’ are indebted to the tune of Rs900 billion. Red alert: If we continue the way we are, Pakistan will soon – very soon – be in a state of financial emergency.
Whether we like it or not, financial emergency is galloping towards us. Whether under a state of ‘financial emergency’ or before that we would have to undertake a whole host of emergency measures including energy conservation, renegotiating the National Finance Award, reducing government expenditures, going for the IMF’s Rapid Finance Facility, arresting the devaluation of the rupee, opening up of trade with neighbouring countries, rearranging both federal and provincial budgetary priorities and debt relief.
Consider this: The World Bank’s Regulatory Indicators for Sustainable Energy (RISE) ranking Pakistan scored 28 out of 100 in energy efficiency. Our ‘energy intensity’ is extraordinarily high (meaning: we use too much energy to produce per unit of GDP). Pakistan consumes roughly 70 million TOE (tons of oil equivalent) valued at some $35 billion. Under ‘financial emergency’ we would have to bring it down by around $7 billion.
The current National Finance Award takes 56 per cent of the revenues away from the federal government but leaves all the mega expenses – including debt servicing, defence, grants and subsidies – with the federal government. This is unsustainable. The National Finance Award would have to be renegotiated.
Next. A falling rupee means even higher inflation. A falling rupee means lower purchasing power. A falling rupee means capital outflow. The freefall of the rupee must be arrested. Under ‘financial emergency’, treasury departments of banks would have to be tamed and over-invoicing of imports is to be stopped.
Our ‘financial emergency’ is about a severe dollar crisis. Our ‘financial emergency’ is about our dried-up cash flow. Our ‘financial emergency’ is about an acute liquidity crunch. Our ‘financial emergency’ is about a dire balance of payments crisis. This is a red alert. Red alert is the final stage of alert. Red alert is the most urgent form of alert.
The writer is a columnist based in Islamabad. He tweets saleemfarrukh and can be reached at: farrukh15hotmail.com