‘No honeymoon period’: Daunting challenges ahead for Pakistan’s future government

Stock brokers monitor share prices displayed on a digital screen during a trading session at the Pakistan Stock Exchange (PSX) in Karachi on February 12, 2024. (AFP)
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Updated 13 February 2024
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‘No honeymoon period’: Daunting challenges ahead for Pakistan’s future government

  • Analysts say IMF negotiations for new loan program, budget preparations and debt management will be key challenges
  • Pakistan will also need to rationalize tax burden on industries, salaried class which is slowing down national economy

KARACHI: As political parties in Pakistan struggle to determine the contours of the next government following last week’s general elections, financial experts say the country’s new administration will need to hit the ground running since there are numerous economic challenges that required its immediate attention.

Thursday’s vote presented no clear winner, with independent candidates, mostly backed by former prime minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) party, winning over 100 National Assembly seats.

Three-time former prime minister Nawaz Sharif’s Pakistan Muslim League-Nawaz (PML-N) bagged 75 seats, while former foreign minister Bilawal Bhutto-Zardari-led Pakistan Peoples Party won 54. Currently, the top political factions are scrambling to form a coalition in their bid to secure the simple majority of 169 seats.

The elections took place at a time when Pakistan, a country of over 241 million, is grappling with macroeconomic instability due to low gross domestic product (GDP) and high inflation that continue to create financial difficulties for a large segment of the country’s population. Other factors militating against the economy include weakening national currency, low tax collection and political instability.

“There will be no honeymoon period for the new government which will have to immediately start working after taking over since the challenges are numerous,” Zafar Moti, CEO of Zafar Moti Capital Securities, told Arab News on Tuesday.

Pakistan is currently engaged in a $3 billion short-term International Monetary Fund (IMF) program and is expected to negotiate another long-term stabilization facility with the international financial agency after the expiration of the current program next month.

Amid the myriad challenges that the new government will face, two crucial immediate issues that will need to be addressed promptly are “negotiating a new bigger IMF program for the balance of payment stabilization and support for the central bank’s foreign exchange reserves,” according to a statement by Arif Habib Limited.

“The subsequent significant milestone will be the formulation of the budget for FY25,” it added.

Khurram Schehzad, CEO of Alpha Beta Core (ABC), a financial advisory firm, said the country had to pay about $75 billion for foreign debt servicing apart from the huge local debt stock in the next three years.

The debt stock of central government has increased to Rs65.2 trillion (about $233 billion) as of December 2023 compared with PKR 63.4 trillion (about $226.7 billion) recorded in November 2023, according to the central bank data.

“One key challenge [for the next government] is management of debt which will need a holistic plan and strategy,” Schehzad said.

“The second big issue is the energy sector management,” he continued. “This implies the supply of cheaper energy and making sure that it reaches the right quarters, right sectors.”

The ABC chief said the third biggest challenge for the next government would be to reduce tax burden.

“Pakistan has the highest tax burden, not only on industries, but on the salaried class people as well,” he maintained. “The irony is that we are one of the highest tax burdened countries in the region, yet we are lowest in terms of tax to GDP ratio.”

Schehzad suggested reducing corporate tax rates from 29 percent to 20 percent over three years, while completely eliminating 10 percent super tax and significantly reducing turnover taxes to alleviate the burden on businesses. He also proposed reducing the sales tax from 18 percent to 13 percent over three years and incentivizing tax compliance through lower tax rates.

Ahsan Mehanti, CEO of Arif Habib Corporation, said the upcoming government will face the challenge of managing mounting circular debt and deal with the social inequalities.

On the economic front, he noted, “we have to deal with the IMF and, going forward, there are issues with respect to the general social inequality that have to be dealt with, especially education, health and poverty.”

“These are the challenges that the new government is supposed to resolve, and these are the growth factors for the country,” he added.

Financial experts also maintained energy tariffs, inflation, interest rates, rupee stability and negotiations with the World Bank, Saudi Arabia, the United Arab Emirates, China and the United States, along with other donor countries, will remain key challenges for the country and the new government.


Saudi ambassador honors Pakistani policewoman for heroic rescue, offers royal invitation to kingdom

Updated 11 sec ago
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Saudi ambassador honors Pakistani policewoman for heroic rescue, offers royal invitation to kingdom

  • ASP Shehrbano Naqvi safely extracted a woman from an enraged blasphemy mob in Lahore last month
  • She received widespread acclaim from the general public and was also praised by Pakistan’s army chief

ISLAMABAD: The Saudi ambassador to Pakistan, Nawaf bin Saeed Al-Malki, praised a female Pakistani police officer for her timely intervention that saved a woman surrounded by an enraged blasphemy mob in the eastern city of Lahore, extending a royal invitation to her for a visit to the kingdom.
Assistant Superintendent of Police (ASP) Shehrbano Naqvi received widespread acclaim from politicians, officials and the general public after a social media video showed her rescuing a woman wearing a dress with Arabic inscriptions, which some people mistook for verses from the Holy Qur’an.
Naqvi, who safely extracted the woman from the crowd, later clarified that the dress bore no sacred inscriptions, featuring only the Arabic word “halwa.”
According to the Associated Press of Pakistan (APP) news agency, during a meeting at the embassy, the Saudi envoy commended Naqvi’s selfless devotion that defused the volatile situation.
He also extended an invitation to her to visit the kingdom.
“The Saudi Ambassador to Pakistan praised the bravery of the police officer and assured her that the Saudi government would cover the expenses of her and her family’s trip to Saudi Arabia as honored guests,” reported the APP.
Independent Urdu, quoting an embassy spokesperson, revealed that Naqvi, along with her family, would be visiting Riyadh as royal guests before performing Hajj.
Prior to her meeting with the Saudi diplomat, Pakistan’s army chief General Asim Munir also invited Naqvi to his office to commend her dedication.
In the past, blasphemy charges have triggered mob lynchings in the country, with politicians assassinated, lawyers murdered and students killed over unverified accusations.


Pakistan’s former interior minister, Mir Sarfraz Bugti, elected unopposed as Balochistan’s chief minister

Updated 01 March 2024
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Pakistan’s former interior minister, Mir Sarfraz Bugti, elected unopposed as Balochistan’s chief minister

  • Bugti took oath as a caretaker federal minister last August before resigning in December to contest the recent elections
  • He asks Baloch insurgents to cease fighting and engage in dialogue, warning that the state would not condone violence

QUETTA: Pakistan’s former caretaker interior minister Mir Sarfraz Bugti was elected as the 25th chief minister of the southwestern Balochistan province on Friday, after no other lawmaker submitted nomination papers to contest the post.
Bugti previously served as the home and tribal affairs minister of the province and remained a senator from 2015 to 2021. Last year in August, he took the oath as the country’s interim minister for interior before resigning in December to contest the recent elections.
He participated in the provincial polls after joining Asif Ali Zardari and Bilawal Bhutto’s Pakistan Peoples Party (PPP).
“I am thankful to President @AAliZardari, Chairman @BBhuttoZardari, my party @PPP_Org, and the people of #DeraBugti who allowed me to serve the people of #Balochistan,” he said in a social media post. “May Allah guide me and help me to do justice with this heavy responsibility.”
Balochistan, Pakistan’s largest province by area, holds a strategic position of immense importance due to its rich mineral resources, including natural gas, coal and minerals, along with its access to the Arabian Sea through the deep-sea port of Gwadar.
The port is also a cornerstone of the multibillion-dollar China-Pakistan Economic Corridor (CPEC), part of Beijing’s Belt and Road Initiative, making the province a pivotal player in regional connectivity and trade routes between Asia, the Middle East and beyond.
Balochistan has also experienced a low-level insurgency for decades by Baloch separatist groups who express grievances over political disenfranchisement, economic marginalization and the exploitation of the province’s rich natural resources without adequate benefit to the local population.
However, Pakistani authorities have always denied these claims.
Bugti, scheduled to take the oath at the Governor House tomorrow, asked Baloch insurgents to cease fighting the state and engage in dialogue while speaking to the media.
“The Pakistan Peoples Party believes in dialogue to resolve all political issues,” the newly elected chief minister said. “We wish all militants to skip violence and become part of the mainstream political paradigm. However, the state will not condone any kind of violence.”


Pakistan condemns Israel’s ‘policy of mass starvation’ after killing of over 100 Palestinians in Gaza

Updated 01 March 2024
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Pakistan condemns Israel’s ‘policy of mass starvation’ after killing of over 100 Palestinians in Gaza

  • Eyewitnesses say Israeli troops opened fire on a group of Palestinians waiting for life-saving aid and food delivery
  • Pakistan’s foreign office says Israel must face justice for committing crimes against Palestinians with impunity

ISLAMABAD: Pakistan on Friday condemned the killing of over 100 Palestinians who were trying to get food from an aid convoy in Gaza City a day earlier, saying the incident had highlighted Israel’s “deliberate and inhumane policy of mass starvation.”
According to eyewitnesses, Israeli troops opened fire on a crowd of Palestinians waiting for aid and food amid the rubble of their city destroyed by relentless airstrikes ordered by the Netanyahu administration last year in October.
Israel besieged the Gaza Strip after a surprise attack was initiated by Hamas in response to the deteriorating condition of Palestinian people living under Israeli occupation. The ensuing war has led to the killing of over 30,000 Palestinians, most of them women and children, as much of the world has accused the Israeli authorities of carrying out a genocide in Gaza.
International aid groups have also complained of increasing difficulties while delivering food supplies to starving Palestinians due to the Israeli military.
“Pakistan strongly condemns yesterday’s massacre by Israel’s occupation forces of unarmed Palestinians, who were awaiting life-saving aid and food delivery in Gaza,” foreign office spokesperson Mumtaz Zahra Baloch said during her weekly media briefing. “This massacre demonstrates a blatant disregard for civility and international humanitarian law and Israel’s deliberate and inhumane policy of mass starvation.”
Baloch reiterated her country’s stance for an immediate and urgent ceasefire while calling for unimpeded access of humanitarian aid to the people of Gaza.
“Israel must also face justice for its crimes against humanity being perpetrated with impunity against the Palestinian people,” she added.
The incident in Gaza has come at a time when various stakeholders in and around the region are trying to negotiate a ceasefire to end the conflict which has lasted for nearly five months.


Brothers accused of sparking blasphemy riot against Christians in Pakistan last year released

Updated 01 March 2024
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Brothers accused of sparking blasphemy riot against Christians in Pakistan last year released

  • The brothers were detained on suspicion of defacing the Holy Qur’an in Jaranwala where a mob vandalized Churches
  • Christians make up around two percent of Pakistan’s population and occupy one of the lowest rungs in society

LAHORE: Two brothers accused of blasphemous acts that sparked a mob in Pakistan to ransack homes and churches in a Christian enclave last year have been freed from jail, their lawyer said Friday.
More than 80 Christian homes and 19 churches were vandalized by crowds in the eastern city of Jaranwala last August, after accusations spread that a Holy Qur’an had been desecrated.
Blasphemy is an incendiary charge in deeply conservative, Muslim-majority Pakistan, where even unproven allegations of insulting Islam have provoked deadly vigilantism.
While police rounded up more than 125 suspected rioters, they also detained two Christian brothers on suspicion of having defaced a Holy Qur’an – a violation of Pakistan’s harsh blasphemy laws which can carry the death penalty.
But the brothers’ lawyer Tahir Bashir told AFP they had been freed after an anti-terror court declined to bring their case to trial on Thursday.
“Without a trial, no suspect can be detained indefinitely in jail,” Bashir said, declining to publicly name his clients out of fear for their safety.
“They are free, they are with their family. They were very happy to be released,” he added.
Hundreds of Christians fled Jaranwala’s Christian quarter last summer when rioters surged in, setting churches ablaze and raiding homes.
At its peak the crowd numbered around 5,000 and was spurred by mosque loudspeakers announcing a Holy Qur’an had been torn, scrawled with offensive words and stuck to the walls of a local mosque.
Christians, who make up around two percent of Pakistan’s population, occupy one of the lowest rungs in society and are frequently targeted with spurious blasphemy allegations.
Politicians have also been assassinated, lawyers murdered and students lynched over such accusations.
Last week, police were forced to intervene in the eastern city of Lahore when a woman wearing a shirt adorned with Arabic calligraphy was surrounded by a mob accusing her of blasphemy.
The crowd of men said the clothing depicted the Holy Qur’an but it was in fact emblazoned with the Arabic word for “beautiful.”
The woman issued an apology for causing offense, but none of the men were arrested.
Pakistan’s top Supreme Court judge has also been targeted by veiled death threats recently after ordering the release of a man accused of disseminating a blasphemous text.


Inflation in Pakistan hits 23.1%, reaching its lowest point since June 2022

Updated 01 March 2024
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Inflation in Pakistan hits 23.1%, reaching its lowest point since June 2022

  • Pakistan faces historically high inflation, though the situation has improved from 38 percent recorded last year in May
  • Given the February inflation rate, experts predict the central bank to begin monetary policy easing from this month

KARACHI: Pakistan’s inflation rate was recorded at 23.1 percent in February, marking its lowest level since June 2022, on an annual basis despite surging food and energy costs, according to official data released on Friday.
Pakistan continues to face historically high inflation, though the situation has improved from the all-time high level of 38 percent recorded last year in May.
Last month, the prices of tomatoes and cigarettes saw substantial increases of 114.6 percent and 71.2 percent, respectively, on an annual basis. Condiments and spices rose by 55.3 percent, sugar by 53.4 percent, fresh vegetables by 46.2 percent and wheat flour by 45 percent.
In the non-food category, gas charges skyrocketed by 318.7 percent, electricity charges by 74.9 percent, transport services by 35.1 percent, textbooks by 34.7 percent, newspapers by 34.2 percent and accommodation services by 29.5 percent.
February’s inflation, the lowest in 20 months, suggests a potential easing in the country’s monetary policy stance.
“The low inflation rate was expected and interestingly despite incorporating recent gas and petroleum price increase in February the number is low. We will see this trend continue in the future and inflation trajectory will be downward,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News.
Given the February inflation rate, experts predict the central bank will begin monetary policy easing from March onwards, with the market anticipating an indicative interest rate cut of around 1 percent this month.
Since June last year, the State Bank of Pakistan has maintained the interest rate at an all-time high of 22 percent.
The central bank recently adjusted its average inflation forecast for the current fiscal year to 23-25 percent, up from 20-22 percent, due to hikes in energy prices.