South Asian Insider
Pak’s troubled economy is hurting more than Imran Khan wants to believe
The Pakistani economy was in shambles much before the lockdown and has been so for decades. There is not much scope for downside, it is already scraping the bottom of the barrel. Even as the Covid-19 pandemic continues to hog the limelight with nearly three million cases around the globe, almost daily there are a couple of stories on how the outbreak is likely to impact Pakistan’s economy. That the Pakistani economy was in shambles much before the lockdown and has been so for decades, should give people strength. There is not much scope for downside, it is already scraping the bottom of the barrel. As far as the cost of living and quality of life of the masses are concerned, these might get a little worse, but nothing people are not already used to. Pakistan is perhaps one of the poorest countries in the region and had it not been for the bailouts and concessionary loans, it would have fallen to pieces years ago. Before coronavirus disease struck the world, Pakistan’s GDP growth rate was estimated to be 3.3% for 2020 and 2.4% for 2021, its lowest in a decade. Now, Pakistan’s real growth rate for 2020 has been projected by the World Bank to go into the negative, between -1.3 per cent and -2.2 percent.Pakistan’s total GDP in 2017 was roughly $305 billion, lower than that of Iran ($454 bn), and expected to grow to $340 billion in 2020. Compared to Iran, a country struggling under economic sanctions, Pakistan’s per capita GDP in 2018 was $1,565, much lower than Iran’s at $5,417. It also scored significantly higher than Iran in its debt to GDP ratio which was 71.69% vs 32.18% of Iran. Its defence expenditure in 2018 was 18.5% of its budget, much higher compared to its rival neighbour India at 8.74%.Struggling with a double-digit inflation, almost 13%, and a budget deficit of almost 9%, Pakistan would need to grow in double digits to break even. The likelihood that this will happen is next to nothing. In layman terms, the country will continue to get poorer and deeper in debt as it borrows more and more to meet its expenditure. Low sources of revenue combined with high non-development expenditures has been Pakistan’s problem for a long time and with or without Covid-19, it will continue to remain so. Interestingly, Pakistan has one of the lowest tax to GDP ratio (1%) which means that it is basically the poor that bear the tax burden through indirect taxes perpetuating the cycle of poverty.Amid the corruption, mismanagement and misplaced priorities, the one thing that has kept Pakistan afloat has been borrowings, both domestic and foreign. It has received $ 1.39 billion under a rapid financing instrument of the IMF to combat the pandemic. The Pakistan Institute of Development Economics has advised economic diplomacy initiatives to reschedule its other bilateral debts to the tune of $ 24 billion.Even though the Chinese have indicated their willingness to consider Islamabad’s request to reschedule debt favourably, the numbers just don’t add up for a pretty picture. Its debt to GDP ratio is 85% and expected to increase to 90% with negative GDP growth and a higher budget deficit than the previous year (8.9 per cent). Pakistan’s total external debt stands at a whopping $111 billion. Unless rescheduled, its debt servicing obligation for 2020 is over $29 billion. The numbers keep increasing as Pakistan borrows more to be able to service its debt obligations and pay for its imports, a classic debt trap. Its foreign exchange reserves at under $11 billion are barely sufficient to cover 3 ½ months of imports. While Pakistan owes over $11.3 billion to the Paris Club, $27 billion to multilateral donors, $5.765 billion to International Monetary Fund, and $12 billion to international bonds such as Eurobond, and Sukuk, the largest chunk, more than $22 billion, is owed to China, largely as a result of the China Pakistan Economic Corridor (CPEC). When the project was launched in 2014, it was valued at $46 billion. By 2019, this figure had gone up to $62 billion, increasing its indebtedness to China in a very short time. Moreover, this indebtedness has come at a time when the country is already living beyond its means.
Covid-19 cases re-surge in Maharashtra, other states follow
By Susmita Ghosh The presence of a new strain of the Covid-19 virus is reported in India, especially in Maharashtra where the coronavirus cases are o...
Oil price in India soars, 4 states offer relief
By Susmita Ghosh In order to rein in the soaring prices of petrol and diesel, four states have cut taxes in recent days. This resulted in giving some...
Civil Servants Union Wants UK High Court Intervention In Priti Patel Bullying Case
(Insider Bureau)- The union for senior civil servants in the UK, First Division Association (FDA), wants the High Court to overturn UK Prime Minister...
Stimulus vote Friday morning?
What that means for the $1,400 check timeline The first milestone vote on the stimulus package is set for Friday, which brings the delivery date fo...
A budget for a 'project finance economy'
This year's budget revealed the mindset of a confident and unapologetic India. In this newspaper, on January 22, I had argued for the need for develo...
Farmers didn't insult Tricolour, Chinese army sitting in India did: Shiv Sena tells PM Modi
Shiv Sena in its mouthpiece Saamana on Wednesday said that the Indian flag was not insulted and it was intact when the farmer's agitation reached the ...
Lok Sabha adjourned repeatedly as opposition continues protest over farm laws
(News Agencies)- With opposition members demanding a separate discussion on the new farm laws, Lok Sabha proceedings were adjourned repeatedly on Wedn...
No propaganda can deter India's unity, Amit Shah on international comments backing farm stir
(News Agencies)- Union Home Minister Amit Shah on Wednesday slammed international celebrities for commenting on ongoing farmers' stir in India. The s...
Indian-American Bhavya Lal Appointed Acting Chief Of Staff Of NASA
Bhavya Lal served as a member of the Biden Presidential Transition Agency Review Team for the agency and oversaw the agency's transition under the adm...
Biden Revokes Trump Rule Ending Work Permit For H-1B Holders' Spouses
The H-1B visa is a non-immigrant visa that allows US companies to employ foreign workers in specialty occupations that require theoretical or technica...
© All rights Reserved. The south Asian, Published Weekly from New york.