Pakistan Is Headed For Destination Bankruptcy: IMF Gives Pakistan "Tough Time"
Pakistan's economy is collapsing like a house of cards, and the country is in the grip of a severe food, electricity, and debt crisis.
Pakistan's currency is losing nominal value by the day after the IMF forced the Pakistani government to lift the currency's artificial blockade. Pakistan's currency lost 1.89% of its value yesterday. After losing Rs. 5.22, the Pakistani rupee reached Rs. 276.58 per dollar. Meanwhile, In the open market, the rupee closed at Rs. 283.
Because of the dollar crisis, Pakistani businesses are losing raw goods imported into the country; more than 9,000 containers remain in Karachi port because local banks are unable to provide dollars to local businesses.
With each passing day, things become uglier for Pakistan's economy and for the ruling class. Pressure is growing on the government because of acute inflation in the country. Pakistan's inflation rate touched 27.6%, which is the highest in 48 years. Basic necessities and food items are becoming scarce in Pakistan; one kg of flour costs Rs. 160 to 180, whereas one kg of flour in India costs only 25-40 Indian rupees.
Fuel prices have also reached an all-time high, with petrol selling at Rs. 250 per liter and diesel selling at Rs. 260 per liter. Some of states of Pakistan are in deep crisis, the states like Balochistan, Khyber-Pakhtunkhwa, and Pakistan-occupied Kashmir, which are experiencing days-long load shedding due to grid failure and saving energy for Pakistan's Punjabi-dominated states of Punjab.
Pakistan is gradually moving toward balkanization, as the world saw with the Soviet Union. The Soviet Union was balkanized not because of political reasons, but for economic ones, as well as the involvement of political leaders in rampant corruption. The world is witnessing the same in the case of Pakistan.
Pakistan's leaders and army generals are extremely corrupt, with illegal assets both inside and outside the country. Their family members are living luxurious lives in the UAE, Canada, or Australia, but the general population is bearing the brunt of the sour fruit that the country's corrupt leaders have cultivated.
Now, Pakistani leaders have come to their senses after the country's economy teetered on the brink of collapse. They are desperate to save the country's economy and are pleading with everyone, including Saudi Arabia, the United Arab Emirates, the United States, and the International Monetary Fund.
The Pakistani government has agreed to implement any condition to get a bailout package from the International Monetary Fund.
In 2019, the IMF executive board Approves a $7 billion 39-Month Extended Fund Facility Arrangement for Pakistan. The government's economic reform program seeks to put Pakistan's economy on a path of sustainable and balanced growth, as well as to raise per capita income.
This program was designed to help Pakistan reduce its debt and build resilience, but today the same dollars are needed to help Pakistan save its economy as well as reduce its debt.
Therefore, only $7 billion can't save Pakistan because Pakistan is in neck-deep debt. According to World Bank, Pakistan's total external debt stocks increased to $130.433 billion by the end of 2021 from $115.695 end of 2020. Pakistan will have to pay $75 billion in 2025 as an external debt.
So, being the writer of this article I don't have any idea how Pakistan will going to save its economy from imminent bankruptcy.
Anyhow, the IMF has agreed to provide Pakistan with the additional funds, but only under strict conditions, which appear to be extremely difficult for the Pakistani government to implement because every ruler in Pakistan is corrupt, including salaried bureaucrats.
Conditions from the IMF:
The IMF has asked Pakistan's government to meet some stringent conditions, one of which will be particularly difficult for Pakistani bureaucrats to meet.
According to the condition, high-level public officials and civil servants with basic pay scales 17 and above, their spouses, children, and anyone in relation to whom these individuals are beneficial owners must file an asset declaration with the federal board of revenue (FBR). To ensure transparency, the asset details will be made public.
To implement that policy, the government will have to introduce the income tax ordinance through the "supplementary financial bill 2021" to ensure compulsory filing of asset declarations and their disclosure. That means the government will have to delete the secrecy clause from tax law to ensure public disclosure of information by bureaucrats.
The majority of the other conditions are related to electricity, diesel, and gasoline subsidies. The IMF has requested that the Pakistani government eliminate all subsidies in these sectors. They have urged the Pakistani government to create a mini-budget that includes an additional Rs. 600 billion in taxation.
The already proposed conditions for mini-budgets are:
1. Jacking up the excise duty to generate Rs25-30 billion.
2. Tax on banks’ foreign exchange income to generate Rs20 billion.
3. A three percent flood levy — projected to generate Rs60 billion.
4. Raising the federal excise duty on sugary drinks to generate Rs60 billion.
5. Withholding tax on bank transactions of non-filers to generate Rs45 billion.
6. Rs20 to 30 billion advance tax on the sale/purchase of an immovable property.
7. Capital value tax on imported and locally assembled vehicles to generate Rs10 billion.
8. Raising federal duty on Tier-I and Tier-II cigarettes by at least Rs2 per stick to raise Rs120 billion.
The Pakistani government must agree to the IMF's proposed proposals or else the Pakistani economy will collapse and the country will be consumed by civil war. Civil war is very likely in Pakistan because the country is dealing with domestic terrorism perpetrated by TTP (Therik-e-Taliban-Pakistan).
As a result, the country's ruling elite must come clean about corruption. To repair Pakistan and the Pakistani economy, the government must remove the condition of dual citizenship from the Pakistani constitution; otherwise, no one in the world will protect the nation's integrity.