Political turmoil affecting economy

ByAsrar Raouf

Former Civil Servent


October 29, 2022

Political Turmoil Affecting Economy

Asrar Raouf describes the current economic situation

The political turmoil affecting economy agitation is negatively affecting the economic movement of the country and when positive concentration is required to buck up economic activity the political turmoil affecting economy schism is seriously depressing it. It has been a long spate of four years that governance in this country has gone to the dogs and anarchy has taken over and no one knows when this period would terminate.

Now another process of confrontation has begun with container politics on the anvil yet again with feverish agitation gripping the country intensifying the polarisation and rendering the future bleak. In this perspective, the economic scenario has gone bleaker as is witnessed by the slipping rupee and falling stock market, and fast-spreading financial uncertainty.

Unfortunately, no one is paying any attention to the woes experienced by the flood affectees who are still languishing and the stakeholders are busy somewhere else. It is indeed worrisome to observe that Pakistani flood victims have not received adequate sympathy from either the Pakistani state or the international community despite the unprecedented disaster.

Though it is estimated that the cumulative losses suffered are to the tune of $31.2 billion yet the forthcoming financial assistance is lukewarm however the World Bank, Asian Development Bank, European Union, and United Nations Development Programme have granted their stamped approval that Pakistan requires $16.2 billion for reconstruction costs.

It is reported that now approval is required from the G-20 countries for providing climate justice as the developed world caused more than 80 percent of carbon emissions but Pakistan’s contribution to them is less than 1 percent. In this context, Pakistan hopes that the upcoming Donors Conference expected to be held in Paris or New York, will show its commitment to helping Pakistan and come up with higher financial numbers.

Sustainable Development Goals In Pakistan

The current situation is that out of total flash appeal in terms of cash and kinds of $860 million, 50 percent was committed which was pretty trivial keeping in view the scale of economic travails confronted by Pakistanis. It is estimated that the floods would likely hamper progress towards the achievement of Sustainable Development Goals (SDGs) in Pakistan by 2030 as 8.4 to 9.1 million people were pushed into poverty while 6 to 7 million people will fall further behind.

An additional 7.6 million people are facing food insecurity and there are 17 million women and children who are at greater risk of preventable disease. There are 4.3 million people with job loss and 640,000 women and girls at risk of Gender Based Violence (GBV) and child marriages. It was pointed out that 70 percent flood the affected population was women and children the Resilient and Reconstruction Plan would be prepared in the next stage and its requirement might be much higher.

Housing, Agriculture and Livestock and Transport and Communication sectors suffered the most significant damage, at USD5.6 billion, USD3.7 billion, and USD3.3 billion, respectively. Sindh is the worst affected province with close to 70 percent of total damages and losses, followed by Balochistan, Khyber Pakhtunkhwa, and Punjab.

The situation is still evolving, with flood waters stagnant in many areas, causing water-borne and vector-borne diseases to spread, and more than 8 million displaced people now facing a health crisis. The crisis thus risks having profound and lasting impacts on lives and livelihoods.

Loss of household incomes, and assets, rising food prices, and disease outbreaks are impacting the most vulnerable groups. Women have suffered notable losses of their livelihoods, particularly those associated with agriculture and livestock. It is reported that what is required for developing a comprehensive recovery.

Some Tragic Disasters About Political Turmoil Affecting Economy

This tragic disaster can be a turning point, where climate resilience and adaptation, increased domestic revenue mobilization and better public spending, and public policies and investments better targeted to the most vulnerable populations; all figure at the core of policymaking going forward. Given Pakistan’s limited fiscal resources, significant international support and private investment will be essential for a comprehensive and resilient recovery.

Beyond the immediate needs of flood reconstruction, these reforms, while protecting the most vulnerable, will be important to generate fiscal space to invest more broadly into more climate-resilient infrastructure and adaptation to climate change.

As well as to build buffers to face future shocks, while addressing macroeconomic imbalances. This commitment of the government will also be key to mobilizing further international support as well as unlocking private sector sources of financing—both of which will be absolutely critical to face the current climate change-induced shock.

Following import compression, the FBR is facing the enormous burden of addressing a revenue shortfall at the import stage in the current fiscal year’s continuing month. It is required that the Inland Revenue Service (IRS) bridge the gap created at the start of the import stage by including customs, withholding tax, and sales tax on imports as the IMF has conveyed its concerns over a possible shortfall on account of the Petroleum Development Levy (PDL).

And has asked Islamabad to curtail the budget and primary deficits within the planned limits. In the last review accomplished in August 2022 and the report released on 1 September 2022, it stated that in case of a shortfall, there should be a contingency plan to take additional taxation measures, including slapping 17 percent GST on POL products and increasing FED on beverages and tobacco.

Political Turmoil Affecting Economy

The government planned PDL to the tune of Rs.855 billion for the current fiscal year, with the possibility of jacking up the PDL ceiling to Rs.50 per liter. At the existing pace, the IMF expects that there might be a shortfall in the current fiscal year.

So, the government would be asked to take other additional measures to bridge the gap to avoid slippages on the envisaged budget deficit, especially the primary deficit for the current fiscal year. The FBR stated that the board collection touched Rs.2,000 billion, a month earlier than last year. The FBR also expressed optimism about achieving the collection target set for FY2022–23.

Despite healthy momentum in revenue generation, the International Monetary Fund (IMF) has asked Pakistan to impose roughly Rs.600 billion in additional taxes and again urged Islamabad to set up an anti-corruption task force. However, the authorities concerned have yet to accept the demand of imposing more taxes amid pinching high double-digit inflation.

One of the leading factors behind evaporating political fortunes of the ruling alliance in the political turmoil affecting economy capital and the opposition’s popularity. The demands were put forth before the Pakistani authorities by IMF along with half a dozen other conditions during recent interactions in Washington.

The IMF is of the view that due to inflation-induced nearly 25% nominal growth of the political turmoil affecting economy in the current fiscal year, the tax-to-GDP ratio would fall below the agreed level even if the FBR achieves its annual target of Rs.7.470 trillion. At the time of the budget, the government had estimated the size of the GDP at Rs.78 trillion on the basis of an average inflation rate of 11.5% and an economic growth rate of 5%. The Weekender


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