Whoever comes to power in the days after February 8 will find that their campaign trail promises will hit the hard wall of reality almost immediately.
by Uzair M. Younus in Dawn: …Rather than focus on delivering relief, the new prime minister and their cabinet, in particular the finance minister, will at best find themselves firefighting during the proverbial honeymoon period, or at worst trying to maintain a slim grip on power through the end of the year…
Starting with negotiations with the IMF to enter into a new multi-year agreement — the $3 billion standby arrangement ends in February — to the presentation of a budget in the early summer, the going will be tough, and it will surely test the regime’s institutional relationships in ways that many are not fully grappling at this point in time…
…three key headwinds an incoming government will face, all of which will test the post-election ruling dispensation’s resolve…
First up is Pakistan’s debt situation, which will continue to limit the space a new government has in terms of providing relief to the masses. Without an IMF program, Pakistan’s external debt situation will worsen dramatically, meaning that there will be no alternative to imposing austerity measures and finding ways to collect new taxes…The second issue will be inflation, which has been ravaging the purchasing power of millions of households for almost five years now…IMF-imposed austerity may help contain the inflationary beast, but that comes at the expense of growth. The alternative — cutting the size of the government and widening the tax base — comes at the expense of the status quo. Choosing the former limits the ability of the government to generate growth and by extension creating jobs, while choosing the latter puts the government on a path towards confrontation with status quo elements that may foment even greater instability in an already fragile system…
The final issue will be foreign inflows, which are critical to maintaining baseline levels of economic stability in Pakistan. While much has been said about the tens of billions coming in from friendly countries, no major inflows have materialized so far. SIFC or no SIFC, a new government will have to find new ways to attract foreign currency inflows…
Whatever the results look like after February 8, the fact is that the party entering power will have very limited legitimacy to begin with, given the turn of events in the last few months. In such a situation, no government would want to antagonize the public writ large or even the key status quo patrons that underpin the country’s political economy. All of which is to say that rather than a year of major structural reform, 2024 may prove to be a year where Pakistan’s political economy muddles along at best, or is tested in unimaginable ways at worst. Read all of it here >
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