Reforms key to recovery

EDITORIAL: Anna Bjerd, World Bank Managing Director for Operations, after the conclusion of her two-day visit to Pakistan during which she also met Prime Minister Shehbaz Sharif commented that Pakistan's path to sustainable economic recovery and poverty alleviation rests on comprehensive reforms that prioritise human capital, macroeconomic stability, climate resilience, sustainable energy and private sector growth.
While such exhortations have been repeatedly given by senior officials of multilaterals for more than two decades yet there is a growing perception in Pakistan that the programme designed by multilateral staff has several major flaws not only because they insist on standard normal conditions that are simply not applicable in Pakistan (particularly with reference to inflation control through a high discount rate) but also by Pakistani authorities agreeing to policies that have had severe implications on poverty levels which, as per a recent report of the World Bank, have reached a high of 42.4 percent (an example being taking administrative measures to pass on the costs of poor governance in the power sector and tax structure onto the general consumers).
In this context, it is relevant to note that the World Bank in a recent report maintained that general sales tax has made the largest marginal contribution to the poverty increase as GST payments accounted for 7 percent of households' pre-tax expenditure, which lends to further impoverishment.
During the week past the head of the department that designed and is implementing the 36-month-long ongoing Extended Fund Facility programme was also on a visit to Pakistan together with the mission leader and met with various members of the government, including the President who acknowledged that the IMF had helped the government stabilise the economy.
There is no doubt that without an active Fund programme the threat of default was a distinct possibility not only because the Fund programme gave a comfort level to other multilateral donors but also because the three friendly countries (China, Saudi Arabia and United Arab Emirates) that have extended 16 billion-dollar rollovers this year indicated that they would withdraw the facility unless Pakistan is on a rigidly monitored Fund programme.
While domestic economists have yet to express any satisfaction at the state of the economy (with rollovers admittedly 2 billion more dollars than the 14 billion dollars projected by the end of the current fiscal year), and net inflows are in the negative, yet there is no doubt that the looming threat of default has been averted.
However, the first review report of the IMF warned that 'while the Debt Service Surcharge (DSS) are expected to fully cover payments the authorities must remove the existing DSS cap (end June 2025) to ensure that the DSS can be adjusted if needed to cover payments should there be any shortfall.' This is critical, given the limited fiscal space, which makes it necessary to ensure that the operations are entirety financed out of the existing DSS, the Fund argued.
Finance Minister Muhammad Aurangzeb had previously stated that the budget would be finalised after the week-long discussions with the Fund scheduled to end on 23 May, which prompted Ahsan Iqbal, the Planning Minister, to state that the budget would be presented to parliament on 2 June. However, Iqbal has now stated that the budget would be presented on 10 June with speculation rife that the authorities and the Fund staff have yet to agree on certain government proposals and finalise the budget.
There is little doubt that subsequent to India's failed adventurism defence outlay would have to rise; however, there is intense debate amongst domestic economists that the lack of a consensus with the IMF relates to the government's intent to lower the tax on the salaried, which has contributed to pushing more below the poverty line, reducing the electricity rates based on projection of reduced costs, higher external borrowings projected for this year (that may be a challenge as budgeted external borrowings this year did not materialise), greater reliance on sales tax with implications on poverty, an easy to collect tax, and low growth with rising unemployment due to input costs in this country being much higher than the regional average.
We not only hope but expect that structural reforms will begin to be implemented in earnest rather than passing on the buck to the hapless consumers as in previous programmes that accounts for strengthening of the elite capture with respect to budgeted revenue generation as well as expenditure allocations.
Copyright Business Recorder, 2025

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Express Tribune

30 minutes ago

• Express Tribune

Speaker Swati slams US strike on Iran

Speaker of the Khyber-Pakhtunkhwa Assembly, Babar Saleem Swati, has strongly condemned the United States' unprovoked attack on Iran's nuclear facilities, terming it a blatant and serious violation of Iran's sovereignty, territorial integrity, the United Nations Charter, and international law. He stated that the strike comes at a time when Iran is already facing aggression from Israel, adding that such actions will not only escalate tensions in the region but also pose a grave threat to global peace. Swati expressed full solidarity and sympathy with the people and government of Iran, urging the international community to take immediate notice of the aggression and play its role in ensuring peace and stability in the Middle East. He further emphasized that international institutions like the United Nations must not remain silent spectators, and that upholding international law should be their foremost priority. Meanwhile, Adviser to the Chief Minister on Information and Public Relations, Barrister Dr Saif, has strongly criticized Prime Minister Shehbaz Sharif's reported proposal to nominate former US President Donald Trump for the Nobel Peace Prize, calling it the "height of sycophantic politics." Barrister Saif said it was incomprehensible to suggest such an honor for a man "responsible for raining bombs on Muslims." He pointed out that President Trump not only directly attacked Iran during his tenure but also rejected ceasefire resolutions on Gaza eight times. "Instead of mediating peace between Iran and Israel, innocent civilians are being directly targeted — and Shehbaz Sharif remains silent, yet talks of nominating Trump for the Nobel Peace Prize. This is not only shameful, it is condemnable," he stated. He further said, "There is a limit to flattery, and Shehbaz Sharif's recent remarks are not just disgraceful but reflect the ultimate level of servitude. Nominating Trump is tantamount to insulting the entire Muslim Ummah."

Express Tribune

3 hours ago

• Express Tribune

Pakistan rejects reports of US strikes via its airspace

Listen to article Pakistani authorities strongly rejected claims circulating on social media suggesting that the country had permitted the United States to use its airspace or territorial waters for military strikes on Iran's nuclear facilities, calling the reports "completely false and baseless." The denial comes amid rising tensions in the Middle East following US strikes on Iranian nuclear facilities. The strikes targeted three key Iranian nuclear sites — Fordow, Natanz, and Isfahan — according to US President Donald Trump, who announced the operation on his Truth Social platform. According to the state television PTV, some Indian media outlets have amplified allegations that US B-2 bombers and warships passed through Pakistani territory to reach Iranian targets—claims officials in Islamabad dismiss as deliberate disinformation. 'These reports are part of a broader pattern of false narratives, particularly pushed by certain quarters in Indian media,' a senior government source told Reuters. اسرائیل ایران جنگ سے متعلق چند اہم فیکٹ چیک؛ حقائق اور پاکستان کا اصولی موقف کیا ہے؟ — PTV News (@PTVNewsOfficial) June 22, 2025 In a statement, the Ministry of Foreign Affairs (MOFA) condemned the US attack, labelling it 'a serious violation of international law' and expressing concern about further regional escalation. 'Iran has the legitimate right to defend itself under the UN Charter,' the MOFA said, urging all parties to respect international law and protect civilian lives and infrastructure. The government reiterated its longstanding position of neutrality in regional conflicts and called for restraint and diplomacy. Officials confirmed that Pakistan has not entered into any new military cooperation related to the Iran-US conflict and no request for operational access has been made by Washington. 'Pakistan maintains a policy of non-involvement and supports dialogue as the only sustainable path to peace,' the statement added. Authorities urged both the media and the public to verify all information through credible and official channels, cautioning against the spread of unverified and potentially dangerous misinformation. In contrast, US B-2 stealth bombers reportedly used Indian airspace to carry out strikes on Iranian nuclear facilities, according to regional sources cited in multiple reports on Sunday. Read: US B-2 bombers used Indian airspace to attack Iran's nuclear facilities Sources claimed the US Air Force's strategic bombers departed from Guam Island in the western Pacific, passed over the Andaman Sea, and then traversed central Indian airspace before reaching their strike zone near Iran via the Arabian Sea. The route reportedly covered coordinates including 15°N, 145°E (Guam), through 10°N, 95°–100°E (Andaman Sea), crossing 20°N, 75°–80°E (central India), and reaching the vicinity of 25°–30°N, 60°–65°E (near Iran's borders). Prime Minister Shehbaz Sharif also strongly condemned the recent US military strikes on Iran's nuclear facilities, calling them a serious violation of international law. He conveyed Pakistan's position during a telephone call with Iranian President Masoud Pezeshkian. The US strikes followed eight days of what Pakistan termed as Israel's "unprovoked and unjustified aggression." 'The Prime Minister expressed deep concern that the US attacks had targeted facilities under the safeguards of the International Atomic Energy Agency (IAEA),' the statement said. 'These attacks constituted a serious violation of international law and the IAEA Statute,' he was quoted as saying. Washington enters Iran conflict US forces struck Iran's three main nuclear sites, President Donald Trump said in a televised speech late on June 21 and he warned Tehran it would face more devastating attacks if it does not agree to peace. The US strikes included 14 bunker-buster bombs, more than two dozen Tomahawk missiles and over 125 military aircraft, in an operation the top US general, General Dan Caine, said was named "Operation Midnight." After days of deliberation and long before his self-imposed two-week deadline, Trump's decision to join Israel's military invasion against its major rival Iran is a major escalation of the assault and risks opening a new era of instability in the Middle East. "A short time ago, we carried out massive precision strikes on three nuclear facilities in the Iranian regime," he announced. Also Read: Tehran vows self-defence with 'all force' after US strikes three nuclear installations The strikes were a spectacular military success," Trump said in the White House televised address. "Iran's key nuclear enrichment facilities have been completely and totally obliterated." Iran's Foreign Ministry has strongly condemned the US military strike on its nuclear facilities, calling the action an unprecedented breach of international law and a grave violation of the UN Charter. In a statement, the Islamic Republic of Iran accused the United States of a 'brutal military aggression' against its peaceful nuclear infrastructure. Tehran held Washington fully responsible for what it called a 'heinous crime' and warned of 'dangerous consequences' stemming from the attack.

Business Recorder

6 hours ago

• Business Recorder

Emergency UNSC meeting called following US attack on Iran's nuclear sites

The United Nations Security Council will convene an emergency meeting today at the request of Iran. According to Foreign Minister and Deputy Prime Minister Ishaq Dar, the emergency meeting, supported by Pakistan, China, and Russia, is being scheduled this afternoon, New York time. The development comes after Prime Minister Shehbaz Sharif condemned the recent U.S. strikes in Iran during a telephone call with Iranian President Masoud Pezeshkian, warning that the attacks posed a serious violation of international law and risked further escalation in the region. According to a statement issued by the Prime Minister's Office, the premier expressed deep concerns that the U.S. strikes had hit facilities protected under the safeguards of the International Atomic Energy Agency (IAEA), calling the move a breach of both international law and the IAEA Statute. 'These attacks followed Israel's unprovoked and unjustified aggression over the past eight days,' the Prime Minister said, while reaffirming Pakistan's unwavering solidarity with the brotherly people and Government of Iran. He also extended condolences over the loss of lives and prayed for the swift recovery of the injured.