Economic cost of the war

A doomsday scenario is looming large for Pakistan as a victim of the war in the Middle East. The government, with a weak economic edifice not responsive to the dynamics of society, has little to do to ward off the upcoming storm of inflation and cash crunch triggered by the US-Iran conflict. Members of the National Assembly Standing Committee on Finance were informed at a briefing yesterday that exports could fall by 50%, remittances could shrink up to 40% and inflation could soar to 17%.

This is an untenable graph for a fragile economy that is structured on debt-procurement, and has an IMF programme with stringent conditionalities to cater to. And given an unprofessional and corrupt revenue generation base, and the ruling hierarchy's pomp and show that ridicules austerity claims, tough times lie ahead for the masses who have already been hit by escalating energy prices and are enduring a sharp slump in their purchasing power.

A glance at the fallout of the 40-day war depicts that it has already cost the country a staggering $10 billion. Here's the breakup: oil import has taken a $334 million per month hit; remittances have been slashed by $333 million; exports have been cut by $400 million; and a rise in freight charges have accounted for $100 million. The Prime Minister is on record saying the monthly oil bill has jumped from $300 million to $800 million. The legislators were thus told that the conflict could cause $10 to $68 billion annual losses to the economy.

The coalition government seems to have no clue as to how to deal with this exigent situation, other than passing the buck of inflation and price volatility to the masses. With the price of oil per barrel likely to shoot up to $150 – as the Strait of Hormuz is barricaded both by the US and Iran – the economy could lose up to $68 per annum. Last but not least, as expatriates in the Gulf are on the receiving end on the job front, it could add up to the government's balance-of-payments miseries. This situation necessitates action, not rhetoric.