Prime Minister Imran Khan’s government often blames the blame for Pakistan’s economic crisis on its predecessors and the coronavirus, in that order, and thanks Prime Minister Khan for downplaying the negative impact of both. Economists from PM Khan and his government recently spoke to Pakistanis and the world about his government’s success in economic navigation.
In November, Imran Khan said in a meeting with political leaders and civil society that the difficult phase of economic recovery was over and the economy had recovered. The following month, Prime Minister Khan said the Pakistani economy had made a remarkable turnaround.
Certainly, the pandemic has played a key role in boosting Pakistan’s economy, which contracted for the first time in seven decades. But the downward trend was evident as early as mid-2018. Pakistan’s GDP grew by 1.9% in 2019, up from 5.8% the year before, when Imran Khan’s Pakistan Tehreek-e-Insaf came to power.
Pakistani observers in New Delhi suggest Prime Minister Khan’s proclamation on the economy may have jumped the gun.
Not everyone in Pakistan besides government is so convinced either. Like this opinion piece in the Aube. Whenever you hear the government proclaiming the triumph of rising exports, keep in mind that the trade deficit grew even faster than exports during the same July-December period, commentator Khurram Husain put on guard against governments turning to data on Prime Minister Khan’s claims of economic recovery. .
Also read: Imran Khan stuck between a shrinking economy and growing opposition
In addition, Pakistan is also struggling to contain inflation which soared to 10.7% in 2020 from 6.8% in 2019 and 4.7% in 2018 when the Imran Khan government came to power. A recent surge in food prices indicates that the upward trend is likely to continue.
Pakistan, in a desperate effort to contain food prices, ended up aggressively importing essentials like wheat, sugar and canola to such an extent that, according to a Bloomberg report earlier this month, the Karachi port was blocked.
The result: Pakistan’s cement exports fell 18% to 633,431 tonnes last month, larger than the 5% drop seen in November, due to the non-availability of berths to load goods. , according to the Bloomberg report.
The economy is also strained by the rise in outstanding debt. At the end of September 2020, Pakistan’s total debt and liabilities stood at Pakistani rupees 44.801 billion ($ 280 billion), an increase of PKR 245 billion over a three-month period.
In addition, about 30% of Pakistan’s total debt comes from external borrowing and reflects an increase of $ 1.05 billion in the July-September quarter of the current fiscal year. Pakistan is expected to pay around PKR 1.2 trillion in debt and liability service under the current fiscal year.
Currently, Pakistan spends about a third of the total budget on debt service. Prime Minister Khan recently admitted the impact of the debt burden, although that was to blame his predecessors. Half of the taxes we [the government] collect in debt settlement loans taken out by previous governments, he told reporters this month.
Some of Prime Minister Imran Khan’s attempt to build the narrative around Pakistan’s economic recovery focused on the current account which had been in surplus for about five months until December, a rarity in a country dependent on imports and stagnant exports. Prime Minister Khan had for weeks hailed the current account surplus as excellent news and also spoke of the achievement with some pride last week.
Also read: Cash-strapped Pak Prime Minister Imran Khan calls for debt relief at UN Covid meeting
Economists, however, pointed out that the current account surplus was perhaps a positive consequence of the Covid-19 pandemic which had slowed economic activity and caused a drop in demand for fuel at a time of low global fuel prices. oil. It also contributed to the fact that travel restrictions across the world have hampered the flow of remittances through informal channels and forced overseas workers to use official remittance channels.
But it’s time for Pakistan to tighten its belt as it seeks to revive the $ 6 billion International Monetary Fund (EFF). It was put on hold in February 2020 after the Covid-19 epidemic which gave PM Khan the space to postpone tough decisions.
The first took place on Thursday when the government announced its intention to increase the electricity tariff by Rs 1.95 per unit. Local media have reported that the government may also soon withdraw PKR 150 billion tax exemption from the corporate sector.
Prime Minister Khan did not refer to corporate tax rates and exemptions when launching a digital ‘Raast’ payment system earlier this month. But he alluded to the need to broaden the tax base. Out of 220 million people in Pakistan, the income tax paid by 3,000 people accounted for 70% of collections, he said.
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