With the country facing one of the worst floods in decades, our economic stability (if there was any to begin with) looks in a dreadful shape. Below are the extracts from an article on the same subject.
..." Some people think they know, and the answer terrifies them. Away from the political mishegoss in Islamabad, calculators are anxiously being pulled out and back-of-the-envelope calculations are furiously being made by the serious-minded folks.
The numbers are numbing: even before the floods, Pakistan seemed to be heading for economic collapse; after the floods, that appears to be all but a certainty.
Gone will be the days of loadshedding — because there will be no electricity at all in the grid. Inflation, which has stayed stubbornly high, will spike again — because a sustained budget deficit is forcing the government to borrow money, keeping the economy awash in surplus money, more cash chasing the same amount of goods.
Revenue projections could collapse — because piling on indirect taxes eventually causes inelasticity to turn into elasticity: in time, the market shrinks as taxes go up. The current account deficit could balloon yet again as remittances, the great, unexplained boon the past few years, stagnate, putting pressure on the exchange rate and making the days of the 100-rupee dollar a distinct possibility."
..." The Americans have a back-up plan: the IMF. That’s where they send the serial offenders and chronic delinquents for the one-size-fits-all treatment.
Since we are already in the embrace of the IMF, round two will call for tougher measures. The first time they forced us to slash subsidies; the second time they’ll take the scalpel to the public sector.
Public sector enterprises (PSEs) lost Rs250bn last year. Outsiders like the International Monetary Fund (IMF) don’t know how to stop that haemorrhaging in a sophisticated way; they will force the obvious: slash salary expenditures. Which means layoffs. A more sophisticated negotiating team from the Pakistani side may be able to minimise the cutbacks, but if sophistication was a trademark of this government, we wouldn’t be in the mess we are in.
Note, though, that the first round of the IMF package hasn’t saved Pakistan, it has just made a bigger mess of things. Electricity prices have been jacked up by 70 per cent in some instances, and yet the sector is on the verge of collapse
It doesn’t take a PhD in economics to figure out why: inefficiencies — a nice word for incompetence, corruption, mismanagement, malfeasance, misfeasance, general thuggery and an unwillingness to play by the rules — aren’t fixed by throwing more money at a problem.
Even if you were to double the price of electricity, the sector wouldn’t become liquid. In fact, it would probably veer towards insolvency, with customers refusing to pay their bills altogether, the fundamental reason for the circular-debt crisis today.
Similarly, slashing the headcount at PSEs will not stanch the losses there. The Railways loses money not because it has too many employees but because it is operating in a structurally flawed market. If you support road carriage at a policy level, as has been the case for decades since the creation of the National Logistics Cell (NLC), there’s little a railways can do — the market will gravitate towards the cheaper option, in this case cheaper because of a deliberate, dubious policy."
P.S: Original article can be read at DAWN.COM | Columnists | Economic collapse.
I have tried to filter out all the political comments and government bashing.