Pakistan Economy Teetering as Pleas for Remedy Mount

Pakistan is showing clear signs of economic meltdown amid deepening political uncertainty in the country, with opposition politicians pleading for a “financial emergency” to be declared and the military publicly calling for fiscal discipline and tax reforms to create a “viable balance between economy and security.”

The co-chairman of the Pakistan People’s Party, Asif Ali Zardari, called last week for a “financial emergency” to be declared in order for a plan to be drawn up to boost exports, contain imports and stabilize the Pakistani rupee to steer the country out of the present economic quagmire, ATimes reported.

“The economy lies on the ventilator and needs extraordinary measures on an emergency basis to put a hold on the further erosion,” Senator Saleem Mandviwalla, Chairman of the Senate Standing Committee on Finance, told Asia Times. He said that in everything from the country’s balance of payment position to its exports, exposure to foreign debt, reserves and remittances, the picture was dire.

The country does have a provision to call a “financial emergency” in its constitution. Article 235 empowers the president to proclaim one if the economic life, financial stability or credit of the country is threatened, allowing “financial propriety” to be restored in the interests of financial stability. Measures may include the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a federation or province.

With a view to cutting Pakistan’s whopping imports of $53 billion (as at the close of the fiscal year 2016-17), the government hiked regulatory duties by up to 350% on hundreds of items. This was the third hike since 2015.

The measure may generate some additional revenue for the public coffers but is unlikely to make a dent in the bulging import bill, which is skewering the country’s balance of payments position. Pakistan’s current account deficit is projected at $12.1 billion, with a trade deficit of $32.4 billion due to a sharp increase in imports and plummeting exports, which dropped to $20.8 billion in the last financial year.

The World Bank predicted earlier this month that Pakistan will need an additional $17 billion by 2018 to service its rising current account deficit and debt payments. “Pakistan is facing headwinds in the external sector and a rising fiscal deficit,” the bank said, at the conclusion of talks with a visiting Pakistani delegation.

A committee of senior bureaucrats had been constituted for the visit following the World Bank’s refusal to deal with Finance Minister Ishaq Dar, who has been indicted by an accountability court in an unexplained assets case.