Is Pakistan heading towards economic fall?

April 05, 2022 (MLN):  Pakistan’s economy is likely to face severe consequences of the raging political noise and prevailing uncertainty.  Since the day the no-confidence motion was requisitioned, the situation is getting worse on the political front which has diverted the focus from existing economic challenges that have been remained unaddressed so far.

After taking a surprising move of the Speaker of the National Assembly on Sunday, ruling that the no-confidence motion was part of a foreign conspiracy, the political climate was expected to be cooled down but the new debate on constitutional violation has made its own way to prolong the period of uncertainty.  

The opposition termed Speaker’s ruling unconstitutional and filed a petition in Supreme Court (SC) against the issue. Later, SC took a sou moto notice as per which a three-bench member started hearing on the case which is expected to be revealed any time soon.

Now all eyes are on the final verdict of SC. The possible ruling may broadly include, either reinitiating voting on the no-confidence motion or continuing with the decision of the Speaker National Assembly implies setting up of a caretaker government and convening elections of the National Assembly within 90 days.

All possible scenarios are expected to continue with the chaos in the political arena of the country leaving the key economic challenges unaddressed in the near term, Shahab Farooq Director Research at Next Capital said in a report.

Throughout the whole political drama, the Pakistani rupee (PKR) has lost its worth by over 3% or Rs5.4 since March 8, the day when the opposition requisitioned a no-confidence motion.  Meanwhile, the Pakistan Stock Exchange has also witnessed multiple sessions of bloodbaths, smashing investors’ sentiments.

The country is already going through a rough patch on the economic front where the major challenge includes a deteriorating current account deficit amid rising commodity prices in the international market. In addition, the depleting foreign exchange reserves have also posed a threat to covering import bills in months to come.

It seems that the current political environment has diverted the attention from the economic challenges that are required to address at the earliest otherwise, the country will have to pay a heavy cost.

Ali Khizar, Independent Economist expressed his concerns in his latest video message over the standstill IMF program, PKR depreciation that crossed 185 per USD and falling reserves that are not sufficient enough to cover import bill for two months.

He emphasized that SC should reach any decision at the earliest so that the new government could be formed to address the macro concerns otherwise Pakistan’s economy would be no different than Srilanka which is currently under a state of emergency.

The upcoming government will have to take tough decisions such as the hike in energy prices including petrol and electricity which were also the part of IMF program, he added.

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