Downside risks for Pakistan remain exceptionally high — IMF

The seal of the International Monetary Fund is at the headquarters building in Washington, DC, April 12, 2024, in Washington, DC. (AFP/File)
Short Url
Updated 10 May 2024
Follow

Downside risks for Pakistan remain exceptionally high — IMF

  • Lender says while government has indicated intention to continue reforms, political uncertainty remains significant
  • Policy slippages and lower external financing could undermine path to debt sustainability, put pressure on exchange rate

KARACHI: Downside risks for the Pakistani economy remain exceptionally high, the International Monetary Fund (IMF) said on Friday in its staff report on the country, ahead of talks with the fund on a longer term program.

An International Monetary Fund mission is expected to visit Pakistan this month to discuss a new program, ahead of Islamabad beginning its annual budget-making process for the next financial year.

“Downside risks remain exceptionally high. While the new government has indicated its intention to continue the SBA’s policies, political uncertainty remains significant,” said the fund in its staff report following the second and final review under the standby arrangement (SBA).

The fund added that political complexities and high cost of living could weigh on policy, adding that policy slippages, together with lower external financing, could undermine the narrow path to debt sustainability and place pressure on the exchange rate.

The IMF also said higher commodity prices and disruptions to shipping, or tighter global financial conditions, would also adversely affect external stability for the cash-strapped nation.

The fund stressed the need for timely post-program external financing disbursements.

Pakistan last month completed a short-term $3 billion program, which helped stave off sovereign default, but the government of Prime Minister Shehbaz Sharif has stressed the need for a fresh, longer term program.

Pakistan narrowly averted default last summer, and its $350 billion economy has stabilized after the completion of the last IMF program, with inflation coming down to around 17 percent in April from a record high 38 percent last May.

It is still dealing with a high fiscal shortfall and while it has controlled its external account deficit through import control mechanisms, it has come at the expense of stagnating growth, which is expected to be around 2 percent this year compared to negative growth last year.

Pakistan is expected to seek at least $6 billion and request additional financing from the Fund under the Resilience and Sustainability Trust. 


Ramadan tests Pakistan’s daily wage workers but faith endures

Updated 8 sec ago
Follow

Ramadan tests Pakistan’s daily wage workers but faith endures

  • Reduced work hours during fasting month cut already fragile incomes
  • Charities, local businesses step in as laborers try to support families back home

ISLAMABAD: Abdul Waqif grips a worn-out shovel and digs into the earth beneath the harsh midday sun, his body bent with age but still moving steadily. Moments later, the 70-year-old hoists a heavy bag of cement onto his shoulders and carries it toward an under-construction house, all while fasting.

For Waqif and thousands of daily wage laborers across Pakistan, Ramadan is not just a month of spiritual devotion. It is also a month of shrinking incomes.

Waqif migrated from Mohmand tribal district in northwestern Pakistan to Islamabad two decades ago in search of work. Like many laborers from rural and former tribal areas, he left behind limited local opportunities to earn a living in larger cities such as Islamabad, Lahore and Karachi.

In Pakistan, daily wage workers, particularly in construction and manual labor, are among the most economically vulnerable. They are paid only for days worked, receive no job security or benefits, and often rely on informal arrangements. Any slowdown in economic activity directly affects their ability to feed their families.

Economic activity typically slows during Ramadan, when Muslims fast from dawn to sunset. Employers often reduce work hours or postpone physically demanding projects to ease the burden on fasting workers. While intended as a gesture of consideration, it means fewer working hours and fewer earnings.

For laborers such as Waqif, who earns between Rs1,000-1,200 [$3.59-4.31] per day, even a slight reduction in work can be devastating.

His suhoor, the pre-dawn meal before fasting begins, usually consists of a few chapatis from a nearby hotel. The hunger and thirst that follow him through the day are constant companions as he lifts bricks and mixes cement in the heat.

But so is his faith.

“Allah gives me courage. I am hungry and thirsty, but I keep working,” Waqif said while wiping the sweat off his brow.

Back in Mohmand district, his wife, four daughters and two sons depend on the money he sends home. Every rupee matters.

“I support them with this work,” Waqif said. “I eat three meals a day here and I also have to save money for my children and send it to them.”

The reduction in work during Ramadan weighs heavily on him.

“I don’t find much work in Ramadan, and I’m worried for my family,” Waqif said.

‘HONEST LIVING’

Finding food for suhoor is sometimes a challenge. On some mornings, someone offers him a piece of flatbread. Other times, he buys what little he can afford from a nearby eatery.

Muhammad Sajid, owner of Al-Hadi restaurant in Islamabad’s G-15 sector, says he tries to ease that burden by offering meals to laborers at half price.

“We don’t let anyone go hungry,” Sajid told Arab News. “We offer sehri and iftar as much as anyone can afford.”

The restaurant serves tea, yogurt, several types of curries and parathas.

Charity groups also expand operations during Ramadan, when community support traditionally increases. The Junaid Welfare Foundation runs a roadside dastarkhwan, or communal meal spread, serving hundreds daily.

Haq Rawan Shareefi, a manager at the foundation, said around 500 people are provided iftar meals each day. The cost of one person’s iftar is Rs200 [$0.72].

“That means, on iftar and sehri, our expenses range from Rs150,000 [$538.97] to Rs200,000 [$718.63],” Shareefi said.

For Waqif, breaking his fast at sunset brings temporary relief from the physical strain of the day. But the financial uncertainty remains.

“I ask Allah for this,” he said. “May Allah give me strength to earn honest living for my children.”