Inflation Batters Pakistan and Puts Pressure on Imran Khan

on Nov23
by | Comments Off on Inflation Batters Pakistan and Puts Pressure on Imran Khan |

Muhammad Nazir canceled his daughter’s wedding. He parks his motorcycle at home and walks to his shop. Many of his shelves are empty because he can’t afford to stock the same supply of candy, soft drinks and cookies that he once did.

A growing number of his customers can’t buy his snacks anyway. The global inflation wave has dealt a severe blow to Pakistan, a country of 220 million people already struggling with erratic growth and heavy government debt.

As the cost of food and fuel eats up a larger share of meager incomes, people are putting pressure on the government of Prime Minister Imran Khan to do something.

“I am not making any profit these days,” Mr. Nazir, 66, said from his shop in Sohawa, a town about 50 miles southeast of Pakistan’s capital of Islamabad. “Still, I come here every day, open the shop and wait for customers.”

While inflation is expected to ease as supply-chain bottlenecks unsnarl, Pakistan feels it can’t wait. On Monday, the government announced that it had reached an agreement with the International Monetary Fund for the first $1 billion of what is expected to be a $6 billion rescue package.

“The economy is the biggest threat that the government is in fact facing right now,” said Khurram Husain, a business journalist in Karachi. “This is basically eroding the very basis of their public support.”

Protests organized by opposition parties have broken out across Pakistan in recent weeks, causing Mr. Khan’s political allies to examine their loyalties. The Pakistan Muslim League-Q, or P.M.L.-Q, party, which is in a coalition with Mr. Khan, said this month that it was becoming difficult to remain part of the government.

Unemployment has risen sharply, too, particularly among college graduates in cities. The number of people falling into poverty is up.

The problems have added urgency to Pakistan’s drive to establish a $6 billion loan program with the I.M.F. Talks have gone on for weeks, stumbling over Pakistan’s insistence that the governor of the central bank, which sets interest rates, report to Mr. Khan’s government, and the I.M.F. insistence that the office remain autonomous. Pakistan was part of an I.M.F. program in 2019, but the program was suspended a year later when the I.M.F. said Pakistan was not carrying out its recommendations for structural reform.

Even if the deal comes through, Pakistan’s economic pain would not end immediately.

Mr. Khan’s government helped Pakistan weather pandemic lockdowns and other disruptions to business and trade with generous spending packages to industry. That drove up demand for imported factory parts, raw materials and other goods, pushing up Pakistan’s trade deficit. That, in turn, puts pressure on the rupee to weaken, making imports more expensive.

“We have a huge budgetary deficit and a huge trade deficit.” said Farrukh Saleem, an economic analyst in Islamabad. “The trade deficit over the last three months I haven’t seen over the last 74 years in Pakistan.”

Mr. Saleem projected that Pakistan’s imports would soon hit $72 billion, more than double the norm.

A stamp of approval from the I.M.F. would make it easier for Pakistan to approach the World Bank and Asian Development Bank as well as capital markets where it could sell bonds.

Mr. Khan’s government has distributed cash to 20 million of Pakistan’s poorest families and subsidized the cost of grains, legumes and cooking oil. If Pakistan completes an agreement with the I.M.F., it will have to tighten its purse strings.

That will hurt Mr. Khan politically in places like Sohawa, where many people supported him in the last general election.

“Imran Khan is a good person and is still liked by many, but his team is not performing,” said Saleem Shahzad, a plumber who recently moved his 6-year-old son to a less expensive school.

“It is incompetent,” he said.

Previous postLAPD Creating Follow-Home Robbery Task Force – NBC Los Angeles Next postMasked Thieves Rob Diners on Costa Mesa Restaurant Patio – NBC Los Angeles

Los Angeles Financial times

Copyright © 2023 Los Angeles Financial times

Updates via RSS
or Email