Soap opera central7/14/2023 Minister Dar - appointed for his relationship with the affluent political Sharif family - rather than for his knowledge of economics, predicted a strong rupee even before he returned to Pakistan from his perch in London.ĭar undercut former finance minister Miftah Ismail who appeared to be optimistic about an agreement with the IMF in June 2022. The Pakistani rupee has lost ground to the US dollar, fuelled in part by the surging demand for smuggling of dollars in neighbouring Afghanistan. As a consequence, import taxes have effectively become taxes on exports. Taxes on imports have also led to a shutdown of the key industries that rely on imported inputs. Inflation has become a tax on the poor who spend more than half of their income on food. In February 2023, inflation rose above 30 per cent, touching 35 per cent in March, the highest level that it has been since 1974. The government announced fuel subsidies aimed to help the poor in March 2023 but they were complicated to implement and could add to the fiscal and energy deficits facing Pakistan. The IMF favours expenditure controls, better tax administration, and an end to subsidies and export tax rebates that favour larger firms and cartels. This disbursement would have helped with the release of funding for the Pakistani government from other multilateral and bilateral sources.īefore releasing the aid, the IMF needed to confirm Dar’s prior promises that China and other countries were willing to play a role in Pakistan’s bailout. But the drama promises to continue as different cases in different locations will keep Khan on the backfoot.ĭuring the political drama, Finance Minister Ishaq Dar failed to reach a timely agreement with the International Monetary Fund (IMF) on a review of the Pakistan economy that would lead to the release of the critical next tranche of aid worth around US$1 billion. The Islamabad High Court deflated the tense situation somewhat by delaying the hearing until 30 March 2023. Federal police botched an attempt to arrest Khan from his Lahore home for failing to appear for a hearing before the Election Commission. The removal of Khan by a vote of no confidence in 2022 by Pakistan’s parliament and the subsequent violence and turmoil in the country created a political soap opera. Pakistan’s Supreme Court is also embroiled in a new controversy surrounding the Election Commission’s postponement of provincial elections in Punjab until October 2023. Ousted former prime minister Imran Khan continues to battle the weak and disparate political coalition that replaced him in the courts and on the streets. ![]() ![]() Pakistan’s dysfunctional political system and self-serving elites are largely to blame. Pakistan is simultaneously trying to cope with several economic and political crises. But volatile politics have hamstrung any coherent government response. Both events exacerbated Pakistan’s economic difficulties. In 2022, climate change led to severe floods in the country and Russia’s invasion of Ukraine affected food and energy supply chains. Pakistan is on the edge of defaulting on its financial obligations. Economics, Politics and Public Policy in East Asia and the Pacific
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