CONTINUATION OF ECONOMICS POLICIES AFTER ELECTIONS- WORLD’S CONCERNS 

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By: Maria Mansab

As Pakistan gears up for its upcoming general election on February 8, the international community is closely monitoring the situation with a mixture of hope and caution. Recent statements from the World Bank, Fitch Ratings, and IMF underscore the importance of policy continuity and reform implementation for the nation’s economic stability.

The World Bank expresses concern that, following the upcoming elections, strong and organized vested interests may spur several potential reversals of critical policy reforms posing ‘high’ macroeconomic risks to Pakistan. Possible reversals encompass the rationalization of gas and electricity subsidies, the reduction of trade barriers, and enhanced property tax collection. Furthermore, it emphasizes that stakeholder risks are also elevated as a result of influential and well-coordinated vested interests, who may actively support the reversal of crucial reforms, including those related to trade tariffs, property taxation, and the energy sector.

Following the general elections on February 8, the World Bank has provided insight into the “broader and deeper reforms” that the nation would be required to implement in the coming years through the subsequent IMF program. In the intermediate future, more extensive and profound reforms will be necessary to bolster investment, enhance confidence, and facilitate fiscal consolidation, which is essential.

Fitch has also maintained Pakistan’s rating at “CCC+” and expressed concerns that the uncertainty surrounding the impending general elections may hinder the execution of structural reforms and provide economic difficulties. The upcoming elections pose significant political and governance risks, as the attendant political pressures may undermine fiscal discipline or the commitment to the ongoing execution of demanding reforms. Furthermore, the future government’s intentions on priorities and dedication to implementing structural reforms remain uncertain.

However, amidst these concerns, there is acknowledgment and confidence in the current government’s initiatives, underscoring the significance of continuing economic policies and reforms. Any delays in the election process could threaten the viability of recent economic reforms and political stability. The international community has acknowledged the caretaker government’s admirable efforts in the areas of energy price reforms, fiscal consolidation, and black market suppression. These measures have effectively reduced the disparity between parallel and interbank exchange rates, thereby facilitating a greater infusion of foreign exchange into the banking system.

This acknowledgment signifies the international community’s trust in the efficient actions implemented by the present administration, emphasizing the necessity for the forthcoming government to uphold and sustain these policies.

The international community’s confidence is crucial, as the World Bank has indicated its readiness to offer additional assistance alongside the IMF through another medium-term loan program. Subject to the continued success of the ongoing reform measures, the newly elected government will sign this program for even deeper and wider reforms.  In addition, the IMF Executive Board is scheduled to evaluate Pakistan’s initial assessment on January 11, which will lead to the approval of a vital $700 million installment. Fitch also stressed the significance of holding elections as planned in February and promptly engaging in negotiations for a further IMF program once the SBA concludes in March 2024.

The approval of 28 high-value investment projects, totaling billions of dollars, by the SIFC council, which includes representatives from both civilian and military stakeholders, has been met with recognition from the international community. Saudi Arabia’s participation in Pakistan’s oil and gas corporation, Aramco, and the collaboration between the UAE and Pakistan under the Comprehensive Economic Partnership Act demonstrate

Pakistan’s dedication to promoting strong economic partnerships and capitalizing on chances for progress.

The international community has recognized that in the absence of ongoing economic reforms, private external flows will be constrained, and import restrictions will likely be necessary to preserve foreign exchange reserves in the face of pent-up demand. These consequences will have a detrimental impact on economic activity and leave enduring economic scars. There will be minimal foreign investment, and the government will continue to be unable to obtain external commercial borrowing.

It is imperative to mention here that the support of the global community for the current government’s endeavors serves to reinforce the ongoing economic reforms that have propelled Pakistan along a path of consistent expansion in diverse economic sectors and industries. The positive assessments and financial support from Fitch Ratings and the IMF serve as indicators of advancements within Pakistan’s economic sphere.

Therefore, the Pakistani economy’s reformation necessitates the maintenance of these stable policies. Once the succeeding government successfully implements and upholds these policies, the country will continue to prosper. The apprehension regarding a possible downgrade from the global ratings emphasizes the imperative for the newly formed government to sustain ongoing reforms and synchronize its policies with its present track record of achievements.

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