Pakistan: Heading toward economic disorder

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By Senator Rehman Malik

The government efforts to make the rupee sustainable against the dollar are being carried out artificially: buying out dollars from the open market against the internal borrowing through private banks and printing of currency. It is impossible to stabilise the economy with 12.93% of inflation at a much lower growth rate with a large budget deficit. I am worried to see the current situation of our economy as the USA will not let Pakistan out of the FATF Grey List with a number of unreasonable objections, i.e., terror financing and money laundering unless we take some really aggressive measures. I discuss here the ground realities of the present crisis which we are facing. Kindly see how the uncontrolled worsening economy is directly affecting our common man and national economic growth.

When a nation goes into self-denial on grave national issues, society starts getting polarised on almost all internal and external affairs. We all have to realise that the country is facing severe challenges, including the rapid destabilisation of the economy.

The recent price hike has hit the masses, and a high rate of inflation of at 12.93 is highly alarming. And it is a significant indicator that there is going to be more price hikes. However, the income slab of the lower middle class and the poor are likely to remain static. The middle and upper-middle-class are going to face the same.

There is no doubt in saying that a common man has fewer needs as compared to the elite class, but the present price hike has made the life of all factions of society miserable in Pakistan. Unfortunately, according to the latest poverty estimates of 2019, 24% of Pakistan’s population lives below the national poverty line, which includes 31% in rural areas and 13% in urban areas. Moreover, 39% of our population experiences multidimensional poverty. We are being driven towards a situation where even the middle class is being pushed towards poverty.

The reports also state that over two-thirds of people in Ex FATA (73 per cent) and Balochistan (71 per cent) live in multidimensional poverty. Poverty in Khyber Pakhtunkhwa stands at 49 per cent, Gilgit-Baltistan and Sindh at 43 per cent, Punjab at 31 per cent and Azad Jammu and Kashmir at 25 per cent, which means none of the provinces is free of growing poverty.

It is regrettable to know that Pakistan’s ranking on the ‘Global Competitiveness Report 2019’ has dropped to 110th during the tenure of the current government from 107th recorded during the previous government. It has slipped from three positions below from last year’s 107th, and it means more social-economic issues will make the ordinary people restless.

Instead of eliminating poverty from the country the poor families are forced to push their children into child labour which is a gross violation of human rights and also the children are deprived of education because of this economic distress. This should be a grave concern for the government that needs to look into it and a child support program must be launched without further delay.

We are having a profoundly negative reputation as a country of the worst child labour offenders as more than 12.5 million children are involved in child labour in Pakistan. And there are hardly any steps taken by the government to put an end to it. It is happening because of economic distress.

The uneven distribution of wealth has created serious class distinction among the masses, which is breeding interclass friction. The poor masses are watching social injustices, and it is giving rise to crime as the deprived class takes law in their hand and resorting to crime. The trend of suicide cases is also increasing

The rulers must know that such a socially distressed class can rise out of sheer dispersion and may revolt to ask for justice through mass agitation hence the government should work out to plan for immediate relief packaged for the common man to reduce his sufferings.

82% of the wealth in Pakistan is sucked by the rich class of the country making wealth distribution highly unequal and varied making the top rich 10% of the population earning 27.6% whereas 10 % lower class including common man earns only 4.1% of the total income. The minimum wage for unskilled workers in our country ranges from only Rs 15,000 to Rs 17,500 a month, which is insufficient for even a small family to pull through the month.

The general concept of our country is that the rulers have less time for the welfare of people and more time for their own self and fir their political survival where this consistent economic distress is an aggregate of inconsistent and inefficient policies designed for poor masses, and it is further attributing public into crises leading to unrest.

The new government had underestimated the potential challenges prior to taking over the charge and made unrealistic and false promises to eliminate poverty within one year to attract the voters.

The government imposed 17% taxes on raw goods and material which has affected the manufacturing industries and city like Faisalabad is currently facing a serious crisis where more than 100k labours have lost their jobs, and it is not the story of just one city as the major cities are also facing the same problem.

This kind of situation will attribute to the reduction of our exports eventually. Pakistan had already lost the grey cloth market because of many unwise sudden decisions that have hit all the industries in Pakistan.

The government has been an utter disappointment in terms of health as well. Over 25 thousand dengue cases have been reported so far: 6,537 from Islamabad, 5,642 from Punjab, 4,403 from Sindh, 4,276 from Khyber Pakhtunkhwa and 2,750 from Balochistan. But the government has kept criminal silence over it. Since the problem has been completely ignored by the authorities, according to the experts this issue is going to worsen next year.

The education sector is worst of all as it has become a big business whereas the standard is gone down unchecked. It is worth noting that the government has confessed that the illiteracy rate is still 58%. The education sector is also in tatters as the government has hardly paid any attention to it. Instead of providing free or subsidised education, it is being noticed that the education business mafia is being allowed to make money from this basic right of every growing child.

The post-education employment/career opportunities are the basic tools to groom and keep the students engaged. According to the IMF, Pakistan’s Unemployment Rate is forecasted to be 6.140 % in Dec 2019, which records an increase from the last reported number of 6.079 % in Dec 2018. Surprisingly, the number of the people/youth who are either graduates or postgraduates have no job, and according to reports, 1.5 million have lost their jobs with worsening economy recent policies announced by the government which includes extra taxes and banking restriction and high rate of bank interests. The businessmen are running away to other countries, and the capital is flying out.

The provision of jobs and the increase in economic growth is done by the business community which has been hit the most with the various government’s sudden actions that have directly hit their business, and it is not a healthy sign for the country.

The businessman is now under pressure because of more banking restrictions recently imposed, which has resulted in an 8% fall in industries and cash has been withdrawn from the banks the businessman is resorting to cash dealings.

I am a supporter of a broader tax net, but it should have been done in stages and not overnight announcements imposing of extra restrains.

The tight SOS monetary PTI policy under the direction of IMF has led to the contraction of large-scale manufacturing industries for the first time in 10 years. The government cut energy subsidies, making petroleum and diesel more expensive while increasing gas prices by 335%. Besides, the State Bank of Pakistan (SBP), increased the key monetary rate from 8.5 per cent in October 2018 to 13.25 per cent in July 2019. While the interest rates have been increased in line with the IMF’s requirements and to rein in inflation, higher interest rates also discourage private investments and dry up liquidity in the system, leading to lower consumption and hence, lower GDP growth. While the government was estimating a 6.2 per cent GDP growth in FY2019, Pakistan’s GDP came down to 3.29 per cent, as compared to 5.8 per cent in the past year.

Foreign direct investment inflows have slumped in the past year—a massive 59 per cent drop, i.e., $73.4 million. Fiscal deficit, which is the difference between the government’s income and expenditure, was at a three-decade high of 8.9 per cent when expressed as a percentage of GDP, going up from 6.6 per cent last year.

PTI government is not doing enough to counteract the country’s economic situation with solid policies. The Pakistani rupee weakened by 33 per cent against the dollar, going from Rs 121 for a dollar in 2018 to Rs165 to a dollar in 2019. A weak rupee means goods become cheaper for overseas buyers, and exporters get more rupees for their dollar earnings, but Pakistan’s exports declined by 1.9 per cent in the fiscal year instead of increasing due to devalued currency. The reduction in rupee’s value did not help as it was not backed by strong policies and lost control on the currency mafias operation in the banks and including some in the ministry of Finance and private dollar mafia.

According to reports, the external debt of Pakistan had reached up to $106 billion up till Sept 2019, while the borrowing from the scheduled banks jumped by 99 per cent within a week ended on Sept 13 making an increase by Rs443.5 billion to Rs899bn.

I would like to state that concern authorities instead of seeing flashy presentations on coloured slides by some bureaucrats and ministers on every sector, especially related to the masses are misleading. It is the need of the time to see the reality on the ground where & how the poor people living in mud houses in villages where even a child of the common man is unable to use simply an electric bulb being too expensive to do his school homework. The nation will not remember & judge this government from its economic performance and the quality of governance.

It is my sad prediction that this government will cut its own life unless it initiated smart moves to revive the derailed economy and the rule of law not by lip services but real practical steps to get the country out of present crises.

Pakistan is already facing 5th generation warfare imposed by India and its associates, and their main targets are our economy, both west & East borders and water resources. The economy is primarily being hit through FATF as a good economy is a symbol of stability which they don’t want Pakistan to have a sound economy. The government needs to focus on the economy as the top priority.

According to the State Bank’s latest report, Federal government debt stock stood at Rs32.197 trillion by October end, versus Rs31.787tr in June this year. In contrast, the same figure at the end of October 2018 was reported Rs25.839tr, from Rs24.212tr in June of the same year. How can we say this as a healthy economy based on massive internal & extern borrowing? It is unfortunate to see this state of affairs of our economy and the government is giving loans to the public under various schemes from the loans obtained from private banks. This is, again, an indirect burden on the people.

The nation has a big question that despite having all precious resources and minerals, why still our country is being graded as inferior and below the poverty line?

Let us pray to Almighty Allah for prosperous Pakistan and that He grants us the strength to fight our challenges. Pakistan Zindabad.

(The author is central leader of Pakistan Peoples’ Party, senior member of Senate and Chairman, Senate’s Interior Committee. He may contacted at rehman.malik@senate.gov.pk)