Another Sri Lanka In The Making? Pakistan On Brink Of Economic Ruin | Insight | Full Episode

 Another Sri Lanka In The Making? Pakistan On Brink Of Economic Ruin | Insight | Full Episode

With the economic crisis deepening, all eyes are on Prime Minister Shehbaz Sharif to ease sufferings of his people. Can he get the country of the woods? Or is Pakistan another Sri Lanka in the making?

A growing debt crisis dwindling forex reserves and soaring inflation push
pakistan to the brink of an economic disaster
at this point is that governments coming and going
bring with them such upheavals which momentarily distract the country from the economic
recovery part the pakistani rupee has been in free fall
in june the repeal plummeted to an all-time low of 211 against the u.s
dollar only strengthening marginally since then
we need the imf yes we need the imf for a year or two maybe three years we can take their
palliative but the longer term solution is ours
with the economic crisis deepening all eyes are on prime minister shabaz
sharif can he get the country out of the woods
or is pakistan another sri lanka
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[Applause]
in the largest fruit and vegetable market in capital city islamabad small vendors like muhammad and etysham have
been feeling the heat of inflation and rising fuel prices in pakistan
inflation hit a two-year high of 13.4 percent in april and consumer prices
spiked according to a survey food prices surged 17.3
while transport costs went up by 31.8
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inflation erodes the buying capacity of the vulnerable poor the rising prices have hit them so badly
that they’ve begun to cut back on spending on essential commodities
skimping on food as well
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people have also been grappling with power shortages during a brutal heat wave that’s hit the country
pakistan is the fifth largest mango producer in the world but this year the
production is expected to drop by roughly 50 percent as the crop has been harmed by high temperatures and water
shortages but it’s not just the production that suffers because of the heat wave
elements
the current economic crisis follows closely on the heels of a political crisis
it saw former prime minister imran khan’s dramatic ouster on april the 10th
in a vote of no confidence creating a turbulent period of political
instability and uncertainty technically it wasn’t supposed to be a drama at all it was supposed to be a
pretty normal procedure of getting rid of our government so the government had lost its majority the allies had dished
it they decided to file a vote of no confidence move which is constitutionally mandated and the vote
of no confidence move was supposed to be also processed according to the constitution that’s exactly how it
happened but in between imran khan in trying to save his government and knowing what was going to come his way
tried to pitch a conspiracy theory in pakistan that drama frankly is part and
parcel of how parliamentary systems work but the real theater as it were which
baffled the world was imran khan’s insistence that it’s a global conspiracy
to get rid of this government so when you talk about the pakistan history this this is our bad luck it’s
not good none of the civil governments complete their tenure in an office as a prime minister every tenure was
disrupted due to something sometime it was cold sometime it was martial sometimes one or other reason there was
always tenure was reduced now i request mr muhammad shabazz sharif to please take the seat of the prime
minister of the islamic republic of pakistan
on april 11 shabal sharif was sworn in as the new prime minister
imran khan however has remained defiant despite his ouster and since then has conducted several
rallies demanding fresh elections in pakistan [Music]
it’s a very fascist thought process which is pursuing and he’s pursuing it in a
economic situation which is very precarious he’s really fragmenting the society he’s trying to create hatred
within the society and this is the real threat what is done with the economy one can manage but when the society is
fragmented when the politics becomes enmity then you have
much bigger problems than economic issues and i think that’s the
disservice that imran khan is doing to pakistan well the manner in which it happened was
clearly not a normal democratic process one the use of money to buy loyalties
that’s something which is largely acknowledged in pakistan we know people who were approached of our party the
legislators who turned down the office and then the cipher coming from the u.s which talked about a direct link between
the vote of no confidence and the u.s foreign policy towards pakistan imran khan is not going to relent he’s not
going to come back to poverty considering the current narrative he’s building conspiracy theory toxic
material being held at people threatening civil war you know you do not come to power in a country like
pakistan by threatening civil war that’s a given but he’s not going to relent he’s going
to insist and uh on his narratives he’s going to persist with the street agitation there’s very little this
government can do about convincing imran khan to stay back and and you know be reasonable
talk about reforms and then move on the nation has been grappling with a
severe economic crisis pakistan faces 6.4 billion dollars of
debt due over the next three years as prime minister shahbaz sharif’s new government has been trying to meet
bailout terms that have been set by the international monetary fund the price hike and the increased taxes
in the recent budget signals that the sharif government has decided to bite
the bullet the budget has addressed some of the subsidiation that we need to remove far
more the oil prices and the gas prices the electricity prices have been addressed but naspers himself admits
that there’s a lot more to go so i think the imf will negotiate a lot more with
the country and we will see some changes maybe a few additional taxes maybe a few additional cuts quite
frankly we need spending cuts but imf is not the agency that can make the spending cuts because spending cuts
are very hard much harder than tax increases and spending cuts really require time and political will to do
that and with election coming up next year i don’t think the imf will be able to persuade the government but it’s
going to be a tough call but because the government needs the imf and needs the financing gap to be filled
in june finance minister ismail presented the budget for the upcoming fiscal year when he promised to remove
fuel and energy subsidies to revive the imf’s six billion dollar bailout package
but not before blaming the imran khan government for the current crisis
everybody blames he did i as a impartial person say everybody is responsible for
that it is not the month sahaja yoga story this decade story every dictator
of pakistan every political government of pakistan they are responsible for it none of the
government ever went for long-term policies none of the government ever started long-term projects which could
benefit pakistan’s economy or pakistan’s revenue generation every government went for ad hoc
projects we started such projects which were visible popular in public but they were not
generating any revenue until something serious happens there will be an adjustment there will
be pain and it’s important for us to try and educate the people on that i know
the politicians hate to do that what is an adjustment program the country is overspent the country’s got
itself indebted more than necessary a certain amount of pain has to be taken
to pay off the debt we have to undertake a certain amount of pain we’ve got subsidies that have been taken those
subsidies have to be paid off imf is the emergency ward of the world if you get into the imf fold
pain has to be taken period there’s no way out
for a nation that’s reeling under the impact of back-breaking inflation and a depreciating currency the revival of the
imf program is crucial prime minister shahbaz sharif has indicated that the country could soon
receive two billion dollars from the lender but the adjustments are bound to hurt
the poor
there is
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who’s been in the food business for 18 years this would have to be the worst year yet
it’s high commodity prices fuel asia’s second fastest inflation
fund
faced with soaring prices hassan is fighting hard to provide for his family
and manage his household expenses he’s the sole breadwinner of a family of
eight and has an elderly father to take care of as well
foreign sellers like hassan are grappling with
shortages of fuel power food and medicines and a currency that’s
depreciating at record speed in june the pakistani rupee became
asia’s worst performing currency in 2022 with a fall of nearly 16.5 percent
against the u.s dollar putting it the bottom of 13 others including the
bangladeshi taka and south korean one the sharif government has raised
gasoline and diesel prices by over 20 percent to make way for the imf loan
if you filter out the politics pakistan has always been weak in terms of policy
we’ve had 23 imf programs and through most of our history we’ve
had a perennial balance of payments problem problem we grow to about six percent we develop a balance of payments
problem our export base is weak our import demand is strong and we have a
problem with our currency management we we are kind of averse to allowing the
currency to depreciate enough to blanch out the imports
we are under heavy debt repayment of debt is issue for us in the
present budget 58 of the budget is going on defense and repayment of
our loans next year we need 41 billion dollars to keep the our economy running
this is the biggest issue from where it would come it will come we’re not
improving our tax authorities our tax machinery is not working they are totally cropped
totally incompetent totally failed we have to address sufficient deficit
issues a fiscal deficit issue is partly its taxes but because we’ve got a tax
policy that is fundamentally flawed we tend to tax commodities we don’t have a
coherent tax policy that is that is based on policies and instruments
secondly we do the tax changes almost every two or three months so that there is no long term horizon for the
businesses to invest fundamental tax reform both of policy as well as administration has to happen and it has
to be a deep reform not just hey i’ll tax this oral tax that it’s just realigning the entire tax policy along
with the administration pakistan has a social security program
meant to support the poorest and most vulnerable
of a population of around 220 million roughly three to five percent are
supported by this program through cash transfers targeted subsidies and increased health and nutritional
coverage even upper middle classes have a tough time
you may have some question built into your monthly budget but when your expenditures shoot up because petroleum
prices are going up and they have a cascading effect on inflation and all the input costs go up they’re passed on
to the consumer the government doesn’t seem to have any salvaging plan for the poor we have been
asking for some sort of a cushion removing school fees like providing
free medicines like helping them deeper into the dole money that government gives them under
different programs but there doesn’t seem to be a holistic package available right now
if you’ve got a very good social safety net uh srs program or bisp whichever name you call it is a very good social
program it’s there it’s working sure we can put in some more cash through it but i still think
that we need to be realistic restructuring by definition means that we will move from obsolete activities to
new activities so when you move from obsolete to new activities it’s never painless
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a taxi driver stays with his aunt in the capital city to save on rentals and
other expenses the government’s cuts to the cash transfer program mean that he has less
money to spend for his family’s household essentials and children’s education
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with increasing political and economic uncertainty the government struggles to keep the
economy afloat while the suffering of ordinary pakistanis like nasib
intensifies
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pakistan has abundant marble reserves with potential to earn billions of dollars from exports of marble products
but issues like primitive quarrying and processing methods have plagued this
sector during the current crisis it’s further affected by increased transportation
costs and high electricity tariffs
the expenditure for the marble industry has gone up by 40
this will increase the price of products and affect the consumer the impact of the crisis is far-reaching
and felt across a range of sectors all industries are having some issues in
steel industry the steel prices become high development
[Laughter]
government in june pakistan unveiled a 47 billion
budget aimed at tight fiscal consolidation earlier this year fuel price caps
introduced by former prime minister imran khan threw fiscal targets off track and stalled the imf loan
the sharif government has laid the groundwork for restoration of the loan by removing the price caps and
increasing fuel prices by up to 70 percent
the imf program we are already there it’s been negotiated measures are negotiated the expenditure
they’ve all it’s all been done we just have to implement them so it’s a continuous progress of
reviews and of meeting the targets the imf itself
does not lend large amounts of money although i think the imf considers pakistan to be a responsible
entity what the imf program does it gives confidence to other lenders [Music]
with austerity measures pakistan is poised to getting the next tranche of
the imf loan the government has also requested the lender to increase the size of the loan from the remaining
three to five billion dollars the fund is meant to help the country
tackle its balance of payments problems manage foreign exchange reserves
and stabilize the economy we need the imf for a year or two maybe
three years the fundamental problem is that there are deep structural problems
such as poorly managed and poorly developed tax policy such as an investment unfriendly environment who
are human resource management policies and biggest problem is our inability to manage our fiscal deficit
which continues to grow thanks to many inefficiencies these issues have been
there for a long time whichever government it is must find the cuts to address these issues and try and bring
this country out of the structural difficulties that take it again and again to a balance of payments crime but
unfortunately our politics does not allow that
reportedly the imf has also asked pakistan to set up an anti-corruption
task force to review the laws aimed at curbing graft in government departments
corruption is a major issue i will say this is the issue in pakistan none of the government i repeat whether they
were dictators or political leaders did anything to stop the corruption imran said it openly those who have the power
in pakistan don’t think corruption is issue in pakistan they don’t mind corruption this is a fact nobody minds
corruption then another bad thing in pakistan is there the the rich class the intelligence here
they are connected through marriages there are relatives they don’t think they are doing
corruption you see lifestyle and income the gap between the rich and poor is increasing delivery
it’s a gap that has widened during the current economic crisis
the poor have become poorer and millions across the country are struggling to
make ends meet
the pre-monsoon showers though unexpected offer a welcome respite amid a
sweltering heatwave but for zarin taj it’s a day away from
work and therefore a day with no income
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with all savings spent on her husband’s treatments zarin had to start working after her husband’s death
picking up even odd jobs to manage household expenses
slowly she picked up business skills and started selling toys
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today with rising inflation and with increasing fuel and food prices
poor people like zarim get the short end of the stick [Music]
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pakistan is among the world’s top tea importers it buys tea worth more than 640 million
dollars as the nation grapples with soaring inflation the government recently urged
pakistanis to drink less tea to keep the economy afloat
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it’s a double whammy for restaurant owners like kazi who were first hit by kovid and then by the economic crisis
as a small and medium-sized entrepreneur kazi has lost 25 to 30 percent of
profits compared to last year the soaring inflation has decimated his
profit margin more than an economic crisis it is the political uncertainty that
worries him a small business
is amazing uncertainty survived
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the current political instability has also exposed pakistan’s vulnerability
the country referred to as the sick man of great asia is often categorized as a failing state
we’ve heard this theory of failed state for a long time the problem with pakistan is that it keeps on going back
to a state where these arguments get revived i think that has been the cycle
uh with pakistan that you know it shows recovery like in 2018 for instance
pakistan’s economy growth percentage was very substantive its ratings were very
high the business was booming and rupees was stable so if you look at uh statistics like four years ago they
weren’t all that bad even in corona pakistan didn’t do badly the bottom line with pakistan is the
argument about being a failed state or failing state or close to
a failure is tied down with political instability
i think political maturity needs to set in and the parliament has
to begin to work as a agency of conflict resolution
unfortunately the last many years we’ve been using the street as a means of conflict resolution but i think the
maturity in the part of politicians will probably set in that we must use the parliament we must
use law making to get whatever compromise there is necessary
to make things work and once that happens then things could change very readily [Music]
pakistan and sri lanka are countries in crisis and both dependent on the imf to
provide relief to their deep economic woes a report by the institute of policy
reforms warned that pakistan could be another sri lanka in the making
pakistan situation is starkly different from where sri lanka is right now or was
when it defaulted in a way it does serve an important purpose because it kind of spurs official them into action
and the more public debate towards the doomsday scenario the greater the
pressure on the uh officials to come up with something which is substantive and sustainable but i don’t think that we
are going sri lanka’s way we have a lot of time to correct
our mistakes but if we don’t correct our mistakes then we will go that route
we have had 23 imf programs and we have not solved our adjustment
program in this agreement that we are just signing today
we are getting two billion from the imf and they’re arranging they they’re doing the usual thing they’ll fill up our
financing gap which is fine at the same time we have to become an investment friendly country if we do that then we
won’t go to sri lanka away former prime minister imran khan has
been continuing his protests and rallies calling for early elections
with the country not out of the woods just yet is it likely to go to the polls soon
no early elections are not a solution today now with the fragility of the economy that you have elections
take 90 days there’ll be a caretaker set up in the country
can they manage the economy i don’t think so having early election will only create more problems for pakistan than
they solve so while i’m all for a new mandate i think pakistan needs to
have this government complete its constitutional term and go to election at its time stabilize the economy and go
to elections look gourmet’s coming and going isn’t really an existential threat to the
country or or to journalism this government was thrown out through a vote of no confidence the previous government
navaji went out because of the scandal but he was replaced by his own party man and then the elections took place
issue really is that governments coming and going bring with them such upheavals which momentarily
distract the country from the economic recovery path so the governments can come and go as long as the basic
consensus on economy and the framework to govern this country is intact
there is consensus among experts that pakistan needs political stability now
not early elections and stability will also put things in
order for those like zarin
with the reigns taking a break zarin and her grandchildren head out to
sell toys
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for kazi giving up is never an option as an entrepreneur he’s worked hard to
set up this small cafe despite opportunities to emigrate he’s
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you

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