By Ghulam Haider
Pakistan’s stark economic divide was brought to global attention last week, as twitterati and news outlets pinpointed the stark contrast between those lining up to savouring a cup of coffee at Tim Hortons, and those struggling to obtain a basic necessity, a mere 20-kilogram bag of flour even at the cost of their lives.
The burgeoning gap between the ultra-rich and the poor is vividly apparent, while the white-collared middle class, considered to be the backbone of a society and economy, is vanishing fast as the nose-diving currency is replenishing its value unabatedly against the dollar with every passing day.
This juxtaposition serves as a poignant reminder of the vast inequality that exists in the country, and the urgent need for meaningful action to bridge the gap and ensure a more equitable future for all Pakistanis.
Amidst Pakistan’s economic struggle, Khalid Umar, a British-Pakistani barrister, tweeted that Mohammad Ali Jinnah’s “two-nation theory” did not pertain to Hindus and Muslims but to the distinction between the “elite and poor, rulers and subjects…kings and paupers”. Umar contrasted the struggling population, waiting in long queues for flour, gas and vegetables, with a leisure crowd at the opening of Canada’s Tim Hortons in sprawling Defence Housing Authority Lahore, which reportedly had the highest sales on its opening day in the Tim’s history.
Twitter users noted the stark contrast between the orderly queues at Tim Hortons, and the chaotic lines of the labourers or workers for subsidized flour that have resulted in deaths while vying for getting the flour bag.
The opening came days after a man lost his life in a stampede as he waited in a queue to get a bag of subsidized flour bag for his family. The scenes of the people running after the lorries and trucks and grappling with one another to be fortunate enough to grab a 20-kilogram wheat flour bag are common amid the highest prices of the staple food in recent times.
IMF demands, tough time for Pakistan
Pakistan has been holding talks with the International Monetary Fund (IMF) to address its severe economic crisis, which is the worst in the country’s post-independence history. The IMF had previously provided a $6 billion bailout in 2019, but suspended disbursements in November due to Pakistan’s lack of progress on fiscal consolidation.
To resume funding, the IMF demands that Pakistan control its budget deficits and move toward a market-dominated exchange-rate regime. In January, foreign exchange companies removed the cap on the exchange rate, causing a sharp fall in the Pakistani rupee’s value against the US dollar.
Pakistan’s central bank announced last week that reserves had dipped to $2.9 billion, the lowest since 1998 and not enough to cover the cost of three weeks of imports. The country is highly import-dependent, particularly with regard to energy, which renders it acutely vulnerable to hikes in global oil and gas prices.
The pandemic did not help, and Pakistan’s tense relations with India continue to deprive it of a potentially transformative trading and investment partner. High military budgets and even unaccounted-for spending on their leaders’ security further undermine Pakistan’s fiscal stability.
In addition to sagging growth, high-interest rates, and sky-high inflation of over 27 percent, the country’s weak governance, political instability, weakening investor confidence, corruption, and pork-barrel politics are among the other causes of the current sorry state of affairs.
Pakistan is desperately trying to raise money ahead of the IMF talks. Its cabinet approved a plan to increase power tariffs, end subsidies, and a revised circular debt management strategy in this sector.
According to the plan, the government will jack up power prices by Rs7.91 per unit in four quarterly adjustments. The government also ended the electricity subsidy given to exporters of Rs 65 billion from March 2023.
However, the IMF’s $6.5 billion package may not be enough to replenish Pakistan’s coffers. The country is still counting the cost of the ruinous floods, which caused more than &40 billion in damages.
Prime Minister Shehbaz Sharif even told his colleagues last week that the IMF was giving the country a “tough time” during this “unimaginable” economic crisis. Pakistan’s international bonds slipped again on Monday after having suffered sharp falls on Friday following the deadlock with the IMF.
Pakistan’s economy is under severe pressure and people dying because of lack of flour and essential food items. The world has been seeing Pakistan going down a spiral and calls of default from international financial institutions are heavy.
American Dollar Exchange Rate
