The aftershocks of the agreement with IMF are being felt by trade, industry and all segments of society. Most-affected are the middle- and lower-middle classes. More will sink below the poverty line. Protected are the elite with deep pockets, ironically, some of them being public representatives and government functionaries in whose hands the citizens have surrendered their destiny.
The nation has been enduring the IMF programme since decades, but never before has it been so devastating. The difference this time is the country’s extremely fragile economy and the Fund’s non-negotiable condition of withdrawal of all subsidies with no exemptions or waivers.
In a competitive market-driven economy there is no room for subsidies. Pakistan is an exception where grant of subsidies has been the way of state governance since long. The politics of subsidies is largely driven by factors such as vote politics, loss-making public sector enterprises, vested interests and favour to certain business lobbies, particularly the textile industry.
With the subsidies gone, the electricity tariffs and petrol prices have skyrocketed - the two pillars that hold the economic and social fabric of the country. Textile industry retaliated. All Pakistan Textile Mills Association (APTMA) decided to shut down textile mills across the country. “The textile mills of the country are to shut down from Saturday October 8, whereas, 600 textile mills have already been closed down,” APTMA had announced.
“Five million employees will lose their jobs and 30 million people will be affected due to the closure of textile industries. The government had withdrawn competitive power rates for textile industry. The closure of textile industry will deal a heavy blow to the domestic exports,” it stated.
On top of this APTMA estimates $ 1.5 billion production losses on account of loss of cotton crop due to recent flooding. “Increasing exports is very important and the only way out for the economy of the country.
The government must provide electricity and gas at competitive rates to textile industry. It should also ensure continuous power and gas supply to textile industry,” it demanded. So it was no surprise that the government acted quickly and obligingly as it re-instated the competitive power rates till the end of the current fiscal year. However, it remains to be seen how this reinstatement be viewed by the Fund. Finance minister Ishaq Dar appears confident that he will prevail over the Fund on this issue.
At the consumer end, the situation is more explosive. The retail price of high-demand vegetables, notably, tomato and onion, surged in the open market followed by prices of fruits, vegetables, grocery items, commodities, etc.
The threatened closure of the entire textile industry and the depleting purchase power of people on account of steep inflation are the first tremors.
More are likely to follow. The consequences would be catastrophic. The incumbent government can neither respond favourably to the plight of the textile industry nor provide relief to millions of its venerable citizens.
Compliance with the IMF dictates is the only option available with the government. In other words, the IMF is government’s first option; it’s its second and last option as well.
This has precedence over all other considerations. The government was perhaps of the view that upon an agreement with the IMF the arranged funding from other donors will flow in and it would be able to rejuvenate the economy and dilute the impact of Fund’s conditions. This did not happen as expected. Donors appears to be in no hurry and are taking their time.
On the other hand, the revenue generation has taken a dip because of an economic slowdown. The same goes for domestic and foreign investors who have shied away primarily on account of political uncertainty and ebbing investor confidence.
The incumbent government is oblivious to what lies ahead. It appears to be banking on the public capacity of tolerance. What is being ignored is the breaking point of tolerance which is often unpredictable, spontaneous and violent.
Copyright Business Recorder, 2022
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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