Pakistan’s economic crisis

 

Pakistan will soon come out of current economic crisis: Dar

Pakistan’s economic crisis deepens, World Bank urges tax reforms

The World Bank has raised serious concerns over Pakistan’s escalating economic crisis, with the poverty rate in the country having surged to 39.4% as of the last fiscal year. This marks an increase from 34.2% within just one year, leading to an additional 12.5 million people falling below the poverty line of $3.65 per day income level. As a result, approximately 95 million Pakistanis are now living in poverty.

 

Tobias Haque, the World Bank’s lead country economist for Pakistan, voiced his concerns on Monday, stating that the current economic model is no longer reducing poverty and living standards have fallen behind peer countries. Haque stressed that Pakistan is facing serious economic and human development crises necessitating major policy shifts.

 

In its draft policy notes prepared for Pakistan’s next government ahead of the new election cycle, the Washington-based lender identified several priority areas for reform. These include low human development, an unsustainable fiscal situation, an over-regulated private sector, and agriculture and energy sectors.

Mandatory use of CNIC (Computerised National Identity Card) for transactions, particularly of assets. This comes as part of a broader call for steep fiscal adjustment over seven per cent of the size of the economy.

 

Despite having the capacity to collect taxes equal to 22 per cent of the GDP, Pakistan’s current ratio stands only at 10.2 per cent, revealing a gap of more than half, according to the World Bank note.

 

This warning by the World Bank comes ahead of the new election cycle, urging the upcoming government to make early policy choices to address these issues. The country now needs to reassess its policy decisions, often driven by the vested interests of military, political, and business leaders.

Pakistan’s economic crisis deepens, World Bank urges tax reforms .

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IMF team to visit Pakistan next week to hold review talks

The IMF will send its delegation to Pakistan next week to hold talks for the release of USD 710 million second tranche of a USD 3 billion loan to the cash-strapped country to stabilise its debt-ridden economy, media reports said on Wednesday.

Pakistan Economic Crisis: A woman checks rice prices at a main wholesale market in Karachi. (AFP)Pakistan Economic Crisis: A woman checks rice prices at a main wholesale market in Karachi. (AFP)

The Washington-based global lender transferred USD 1.2 billion to Pakistan in July as part of the USD 3 billion bailout programme for nine months to support the government’s efforts to stabilise the country’s ailing economy. Although essentially a bridge loan, it offered much respite to Pakistan, which was battling an acute balance of payments crisis and falling foreign exchange reserves.

  

The first review talks will be held November 2 onwards for the second loan tranche of USD 710 million and a staff-level agreement would pave the way for its approval by the International Monetary Fund (IMF) board in December, The Express Tribune newspaper reported.

“The IMF team led by Nathan Porter will field a mission to Pakistan starting on November 2 on the first review under the current Stand-By Arrangement (SBA) of USD 3 billion,” Esther Perez, the resident representative of the IMF, was quoted as saying by the paper.

 Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation.

 The federal government and the State Bank of Pakistan remain hopeful that they will comfortably complete the review on the back of meeting the conditions agreed with the IMF in July.

 However, the external financing gap remains a hard area for the government, as the Ministry of Finance’s internal assessment shows a wide gap between the loans planned to be received and the actual disbursements during the current fiscal year, the report said.

 Meanwhile, Pakistan’s finance secretary has convened an important meeting of all ministries, divisions, and departments on Thursday to get an update on all structural benchmarks, indicative criteria and performance criteria agreed with the IMF for the end of September 2023, according to the Geo News.

 Pakistan’s shaken economy has compelled it to approach several nations seeking fiscal help in the form of loans.

 On Wednesday ahead of the IMF talks, Pakistan asked Saudi Arabia to provide a USD 1 billion oil facility on deferred payment for the calendar year 2024, The News International reported.

 “Pakistan has made a formal request for USD 1 billion Saudi Oil Facility on deferred payment with effect from January 2024. Saudi Arabia has not yet given its confirmation, and its exact modalities will be worked out within the next couple of months, including attached cost and other terms and conditions,” a source was quoted as saying by the paper.

 The facility is part of the financing plan agreed upon and worked out with the IMF by Pakistani authorities as part of the USD 3 billion Standby SBA.

 The existing facility will expire in December of this year.