Economic challenges await next govt as Pakistan votes

Pakistan is set to hold its national elections on Thursday, a crucial event for the country grappling with multiple crises.

As the new government prepares to take charge, it faces daunting challenges in stabilising the economy.

Last summer, Pakistan narrowly avoided a sovereign default through a last-minute $3 billion bailout from the International Monetary Fund (IMF).

However, this lifeline is set to end in March, and officials anticipate the need for a new, extended programme.

Negotiating this program swiftly is imperative for the incoming government, as the economy is burdened by record-high inflation and slow growth resulting from stringent reforms.

The country’s headline inflation stood at 28.3 per cent year-on-year in January, slightly lower than December’s 29.7 per cent. Despite government expectations, citizens are anxious for the new administration to address the soaring inflation that has significantly impacted their daily lives.

Moreover, recent increases in gas prices, with a 35.13 per cent hike for Sui Northern Gas Pipelines Limited (SNGPL) and 8.57 per cent for Sui Southern Gas Company Limited (SSGC), add to the economic challenges. The move, effective from January 1, 2024, is the second increase in gas prices this fiscal year.

In addition to rising gas prices, the cost of petrol and diesel has surged, with a notable increase of Rs13.55 per litre announced on February 1, 2024. This hike is attributed to the ongoing tensions in the Middle East, including Israel’s conflict with Gaza and Houthi attacks in the Red Sea.

Amid these economic hardships, the National Electric Power Regulatory Authority (NEPRA) has approved an increase in electricity tariffs for distribution companies (Discos) by Rs4.57 per unit for December 2023. This adjustment addresses the escalating fuel costs impacting the power sector.

The new government is also expected to address the exchange rate concerns as the Pakistani rupee struggles against the US dollar, currently standing at around Rs279.

The disparity has led to increased prices for essential commodities, further straining the population.

Adding to the complexity of the upcoming elections is the high political tension, with former prime minister Imran Khan describing a crackdown on him and his party.

Khan, who has been in jail since August, faces pending cases, including accusations of ordering violent attacks on military installations.

Despite his imprisonment, Khan maintains substantial popular support, and continued political unrest could jeopardise the stability needed for economic recovery and foreign investment.

As Pakistan stands at a critical juncture, the incoming government’s ability to navigate these challenges will determine the nation’s economic trajectory in the coming years.