ISLAMABAD:In 2024, Pakistan narrowly avoided a sovereign default and managed to stabilize the economy on the back of yet another International Monetary Fund (IMF) bailout package. But the New Year is roaring with challenges of retaining duty-free access to European markets and handling any policy shift by the United States.
Pakistan’s marginalized salaried class was pushed to the edge after, in a highly unjustifiable decision, the government and the IMF increased its tax burden to an unbearable level of 39%, forcing many people to think about their plans for the future. As a result, in July through November, the salaried class’s tax payments phenomenally jumped by 57% to Rs198 billion.
The economic decision-making remained fragmented between the dwellers of the Q Block -the seat of the Finance Ministry, Prime Minister’s Office and the Deputy Prime Minister Office.
The government appointed Muhammad Aurangzeb as the country’s new Finance Minister who secured Pakistani nationality after taking oath of office. But the banker turned politician lost significant control to Deputy Prime Minister Mohammad Ishaq Dar who gradually sneaked into the economic decision-making. Ishaq Dar is now taking decisions from gas imports to development budget approvals and taxation matters.
Like the previous years, 2024 was not different in terms of economic challenges. The security and political problems compounded manifold, which made it difficult to bring in any foreign investment coupled with inconsistent economic policies. The Special Investment Facilitation Council too failed to bring any foreign direct investment in 2024 -its second year of existence.
After prolonged parlays spanning over months, the board of the IMF approved a $7 billion Extended Fund Facility -the nation’s 25th bailout package. The bailout did provide an umbrella to temporarily avoid default by seeking rollovers of about $17 billion or 70% of Pakistan’s external debt related obligations.
Both the IMF and the federal government took a shorter path of deferring the liabilities instead of taking the tough but sustainable route of debt restructuring. As a result, the default threat would keep looming and Pakistan will be compelled to stay in the IMF programme for a longer period to avert the eventuality.
The government could not effectively negotiate with the IMF and signed on the conditions, many of which cannot be implemented without setbacks. Soon after the approval of the programme, the IMF had to send an emergency mission to Pakistan to review the implementation status.
