EDITORIAL: The government has pledged to refrain from any further increase in salaries and pensions beyond those approved in the budget for the current fiscal year (30 to 35 percent depending on different grades) in the first review of the ongoing 3 billion dollar Stand By Arrangement with the International Monetary Fund (IMF).

The staff level agreement (SLA) was announced on 15 November 2023, the letter of intent signed as per process by the two economic team leaders, caretaker finance minister and Governor State Bank of Pakistan, was dated 18 December 2023 and the clerks staged a protest in Islamabad on 18 January 2024 calling for a 10 percent further increase in the disparity reduction allowance and a 100 percent increase in medical, conveyance and housing allowances for grades 1 to 16.

There is no doubt that the hands of the government are tied because in case the SBA is suspended, friendly countries would withdraw their rollovers (evident since 2019) and pledged multilateral and bilateral assistance would freeze – assistance which is contingent on the country being on a harsh upfront IMF supervised programme.

Pakistan’s rating militates against borrowing from commercial banks abroad or to incur debt equity through issuance of Sukuk/Eurobonds, which together with cessation of multilateral/bilateral assistance would lead to resurfacing of an imminent threat of default.

Needless to add, if the threat of default materializes then the rate of inflation and shortages of all imported (particularly petroleum and cooking oil) as well as essential items would be even more unbearable than the existing high inflation

The clerks’ rationale is equally relevant. For the week ending 18 January 2024 the sensitive price index was 44.64 percent, for the week ending 11 January it registered at 44.16 percent, for the week ending 4 January it was 42.86 percent and on 28 December 2023 the index was 43.25.

The average for the past four weeks comes to 43.7 percent and this raise is higher than the 30 to 35 percent that was raised by the eleven-party coalition government effective 1 July 2023. It is, therefore, evident that the capacity of the clerks to meet their weekly budget continues to be compromised with each passing week.

However while one can empathise with the eroding value of each rupee earned by the clerks who are paid for at the taxpayers expense yet what needs to be considered by the stakeholders is the fact that by and the large the private sector which is the major source of employment in this country was not able to give any wage increase in the current year and suffered a decline in large scale manufacturing index (LSMI) that accounted for rising unemployment levels (which are not quantifiable in this country as the credibility of labour exchange data is highly suspect because the market remains largely undocumented).

The LSMI for July-June 2022-23 was negative 10.3 percent as per the Finance Division while for July-October 2022-23 it was negative 1.67 percent against negative 0.44 percent for the comparable period of the current year. The Pakistan Bureau of Statistics has released an LSMI for October 2023 at negative 4.08 percent (against negative 1.4 percent in October 2022) and claimed plus 1.59 percent in November (against November 2022) and 3.63 percent when compared with October 2023.

The obvious conclusion is that positive growth in LSMI in November 2024 after a long period of negative growth does not merit complacency as any claim that a trend has been set requires at least two to three months of sustained positive growth.

However, in an effort to prove success the Finance Division in its December Update noted “signs of potential recovery in the industrial sector reflected by positive trends in high-frequency indicators,” and this was in spite of concerns over the massive rise in the cost of inputs (electricity, gas, petrol and cost of borrowing) by many industrial sub-sectors including textiles.

To conclude, the economic impasse persists to this day and in this context for the PML-N supremo to pledge construction of roads and railways to constituents smacks of, at best, being kept unaware of the ground realities by his brother former Prime Minister Shahbaz Sharif and his samdhi former finance minister Ishaq Dar or, at worst, deliberately trying to mislead the voters.

Proliferation of social media in Pakistan should have brought it home to Nawaz Sharif and his party leaders/members that the days of announcing a wish list as a pre-election manifesto and not following through are long gone.

The people of this country during his four years in exile have become more discerning and while the party’s diehard supporters will not change their vote yet the swing voters, the ones whose votes are critical to forming a government without any stakeholder assistance, are unlikely to be swayed by empty promises.

Copyright Business Recorder, 2024


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