Pakistani elections: Can the next government achieve economic stability? | elections

Islamabad, Pakistan – It is often tempting to declare every election to be the most important in a country’s history. But when Pakistan goes to the polls Thursday – It may be what some critics warn about the most Not free And yet, it is no exaggeration to say that the risks are very high.

Former Prime Minister Imran Khan He remains in prison while the authorities suppress his party, the Pakistan Tehreek-e-Insaf, while former Prime Minister Nawaz Sharif, who was previously imprisoned and exiled, returns to run in the elections alongside a group of other parties. Candidates From left to right.

However, the focus of these elections is not only on addressing nearly two years of political instability, but is critically focused on forming a resilient new government capable of stabilizing an economy in crisis for the 241 million people of Pakistan.

About 40 percent of the population lives below the poverty line, and inflation has risen to more than 30 percent, according to a recent report. vote Which was released this week, about 70 percent of Pakistanis believe that economic conditions are deteriorating.

Last June, Pakistan faced an imminent threat of debt default, with foreign reserves falling to $4.4 billion – barely covering a full month of imports – while the currency lost more than 50% of its value against the US dollar.

As the country found itself at a perilous juncture, then Prime Minister Shehbaz Sharif managed to secure a decisive agreement. Rescue package From the International Monetary Fund – the Fund’s 23rd program since 1958 – just weeks before the end of the government’s term.

Interim government Take power In August 2023, it faced the key challenge of ensuring the continuity of the IMF’s $3 billion programme.

Over the course of nine months, the IMF’s Standby Arrangement (SBA) agreement entailed strict measures, including eliminating subsidies on basic commodities and allowing the value of the rupee to be determined through the open market.

With the current International Monetary Fund program ending in March, and with the new government coming to power, analysts confirm that the first action of the winning party must be to return to negotiations with the global lender to maintain stability.

Meanwhile, Pakistan faces a looming debt repayment crisis, with the central bank announcing external debt obligations worth $24 billion due by June 2024.

“Anti-populist” steps.

Karachi-based economist Asad Saeed asserts that the next government needs to negotiate a new program with the International Monetary Fund, while also taking steps to reduce expenditures and balance the budget deficit.

Saeed said: “The government must continue to take steps of an anti-populist nature. Gas and oil subsidies cannot be resumed, the exchange rate cannot be manipulated, and the focus must be on reducing expenditures and balancing the budget deficit.” He is a director at Al Jazeera’s Collective Social Science Research (CSSR) research firm.

Sajid Amin Javed, a senior economist associated with the Sustainable Development Policy Institute in Islamabad, urges the next government – ​​regardless of its political affiliations – to prioritize economic decisions over political considerations and immediately engage with the IMF.

“The new government must keep politics separate from the economy. They must avoid the populist-driven decisions taken by some of its predecessors,” Javid told Al Jazeera.

The urgency conveyed by economists underscores the critical state of Pakistan’s $340 billion economy amid a volatile political landscape.

A recent history of economic challenges includes Pakistan’s entry into a $6 billion, 39-month IMF bailout program in 2019.

In early 2022, then Prime Minister Khan issued a reduction order Fuel prices Amid global upheavals due to the Ukrainian-Russian war, IMF requirements were violated, leading to challenges for the subsequent government.

Khan’s government was overthrown in April 2022, and was replaced by a coalition government formed under the banner of the Pakistan Democratic Movement (PDM) – an alliance that also included Sharif’s party, the Pakistan Muslim League-Nawaz (PMLN).

In August 2022, the People’s Democratic Movement government It has been resumed IMF program But Finance Minister Miftah Ismail was soon replaced by two-time former Finance Minister Ishaq Dar.

However, economists have argued that Dar’s attempts to control the exchange rate have had negative effects on the economy, similar to the PTI government’s decision to reduce petrol prices.

Economist Saeed said one of his concerns about the PML-N government – the front-runners in the election – was if they brought back the same economic policies pushed by Dar, a senior member of the party.

“If the PML-N wins a simple majority and comes to power, it may end up taking steps that could derail the already delicate economy. It will once again teeter on the brink of crisis and possible default.

Interactive_Pakistan_elections_2024_Pakistan at a glance
(Al Jazeera)

Addressing inflation

In addition, the impact of inflation over the past year and a half is another pressing issue, which has led economists to stress the need for the incoming government to reset its priorities.

Islamabad-based economist Javed warned that wrong policies could jeopardize the delicately balanced economy, potentially leading to a crisis and default.

He said: “Tackling inflation and protecting people from the side effects of stabilization policies must be a top priority.”

People, especially the poor, have suffered greatly. High inflation and unemployment rates for a long period have pushed many below the poverty line. They need support.”

Ali Hasnain, associate professor of economics at Lahore University of Management Sciences, highlighted the persistent challenge of balance of payments crises throughout Pakistan’s history.

“There has not been a decade in which we have not stumbled through a balance of payments crisis and suffered a ‘sudden stop’ in our economic management, accompanied by rapid and unplanned devaluations of the rupee and a painful rise in the cost of living.” He told Al Jazeera.

Highlighting the country’s plight, Hasnain said Pakistan was required to pay nearly $90 billion in external debt obligations in the next three years.

These commitments require the country to repay more each year than it received, $60 billion, in CPEC investment over a decade.

“The government urgently needs a plan to address this reality. He added: “But since this seems almost certainly not possible, we need to negotiate with our lenders, either by restructuring our debt, or by offering shares in Pakistani assets.”

Next roadmap

Fahad Ali, assistant professor of economics at Lahore University of Management Sciences, predicted that the next government will struggle to align election campaign promises with the reality of a sluggish economy.

“Party manifestos of leading parties promise generous spending. This will be a difficult promise to fulfill given that the new government will likely have to sign another three-year agreement with the IMF.”

SDPI’s Javid stressed the need for any government to outline a plan for the first 100 days, with a focus on expanding the tax net. The tax-to-GDP ratio, currently at 10.4 percent, is among the lowest in the Asian region.

Economist Saeed stressed the importance of policymakers helping the country move away from the long-standing “consumption-led growth model.”

Latest Economic Survey of Pakistan June 2023 (PDFHe revealed that consumer spending represents nearly 94 percent of the country’s GDP, while the share of investment remains more than 13 percent.

However, Saeed emphasized that the imminent threats faced by Pakistan are the challenges and impact of climate change and climate-induced disasters.

Flood remindersBiblical proportions“Just two years ago, he emphasized the need for significant investment in climate change mitigation and adaptation strategies.

“Climate-related disasters occur every year, and we need significant investments in climate change mitigation and adaptation strategies and policies,” he said.

We must strive to invest in this sector, but to achieve this, the issue itself must be recognized and acknowledged first.

(Tags for translation)Economy

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