New Delhi, Nov 2 (IANS) Pakistan’s Finance Minister Muhammad Aurangzeb has become one of the busiest travelers in global finance. One week he’s in Washington, lobbying the International Monetary Fund (IMF) for yet another tranche of emergency funding; the next, he’s in Riyadh or Abu Dhabi pitching the sale of Pakistan’s national assets from Pakistan International Airlines (PIA) to airports and energy infrastructure.
In many ways, Aurangzeb is less a finance minister than a broker of desperation, auctioning off what remains of Pakistan’s economic sovereignty.
The country’s fiscal crisis is not new but continues to be in a risky phase. Pakistan is no longer merely borrowing to stay solvent; it is now being compelled to sell off the remnants of its public sector to keep the economy breathing.
Yet, despite repeated bailouts and promises of reform, the fundamental ailments of Pakistan’s economic system, that is entrenched elite capture, structural inefficiency, and the outsized role of the military in its financial life, remain untouched.
Pakistan’s economy has teetered on the brink of default for over three years. In April 2022, the country narrowly averted a sovereign debt crisis. Its inflation skyrocketed to approximately 38 per cent in May 2023 while foreign exchange reserves dropped exponentially to $8.7 billion by February 2023.
Since then, Islamabad has received two IMF bailout packages, multiple loan deferments from China and oil and gas deferred payment options from the Gulf states. But these have merely bought time, not transformation.
The numbers tell the story. Pakistan’s external debt has hovered above $130 billion for over a year, while foreign exchange reserves remain dangerously thin, currently at around $19 billion which can cover only a month and half of its imports.
Inflation has oscillated between 3 and 38 per cent, which has qualitatively eroded the purchasing power of ordinary Pakistanis. The rupee continues to slide with 1 USD priced at over 285 PKR whereas energy prices remain high with petrol priced at PKR 265 per liter and diesel at PKR 275 per liter have soared.
Moreover, the unemployment rates are only increasing and are currently recorded at around 8 per cent whereas nearly 40 per cent of people battle multidimensional poverty as per latest statics from UN Development Programme (UNDP).
Yet, what stands out is not the depth of Pakistan’s economic pain but the shallowness of its political will to reform. Each IMF program since the 1980s has come up with a familiar checklist of reducing subsidies, broadening the tax base and improving fiscal transparency. And each time, Pakistan has promised compliance but never moved beyond policy rhetoric.
The current government’s “reform agenda” under Prime Minister Shehbaz Sharif and Finance Minister Aurangzeb has been no different. While the rhetoric of “structural transformation” fills speeches and communiques, but the reality is cosmetic tinkering.
Take the case of broadening the taxation base of the country. Despite years of IMF insistence, Pakistan’s tax-to-GDP ratio remains stuck at around 9 per cent, which remains one of the lowest in Asia.
Its situation has been worsened by the fact that the wealthy elite, including feudal landlords, industrial magnates, and military-linked conglomerates, have largely found ways to escape the tax bracket. Meanwhile, the burden falls disproportionately on the salaried middle class and consumers through indirect taxes.
–IANS
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