Risk mitigation

Editorial June 20, 2024


Pakistan’s dilapidated state of economy was flagged by Moody’s as it expressed concern once again over the country’s weak debt affordability. The leading global rating agency believes the plummeting affairs will drive high debt sustainability risks, as a major pie of receipts is earmarked for debt-servicing. This makes it untenable as the government has floated a budget of Rs18.7 trillion, leaving less than 20% for development and social mobility. Moreover, it also notes that the volume of debt payments has increased by about 18% to Rs9.8 trillion; subsidies have risen by 27%, especially in the power sector; and there is an inefficient governance plan in terms of cost-cutting and austerity.

Close on the heels of this depreciated graph, Fitch, another American credit rating agency, sees a partial implementation of the proposed budget, and fears that another bailout from the IMF is indispensable. Pakistan is eyeing an elevated package of up to $8 billion from the Washington-based lender, driving fears of higher inflation and social unrest. Almost 40% excess burden of taxation has been slapped on the salaried class, with a tender pat on the wrist of big businesses that still remain out of desired taxation. This dichotomy, coupled with a feeble growth, is at the fountain of all ills. The government’s inability to ensure food security despite a bonanza crop — coupled with its industry remaining un-competitive because of higher energy production costs involved — is a nightmare dwarfing its face.

Such nerve-wrecking assessments must be taken as an opportunity in disaster to fix the economy. The country is in dire need of foreign investment to consolidate its indigenous potential and swing in growth and sustainability. Introducing institutional reforms, drastically cutting the size of the government and doing away with elite capture are sine qua non to stay afloat. Only then can the risk factor be mitigated, and international players motivated to throw in their weight.


Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ