SUMMARY of the Article “Three-year reform plan for IMF exit strategy” by Ishrat Husain, Dawn, October 6th, 2024
The article outlines a comprehensive three-year reform plan for Pakistan to smoothly exit the International Monetary Fund (IMF) program and achieve self-sustained, non-inflationary growth. It highlights the need for domestic reforms beyond merely stabilizing external accounts. To achieve these goals, the government must increase investment, control fiscal deficits, devolve basic services to local governments, address the energy crisis, and reform the civil service. Key reforms include raising the investment-to-GDP ratio to 20% by FY28, controlling the fiscal deficit at 5%, and achieving a primary surplus of 3%. Public investment should rise to 5% through fiscal consolidation, while private sector investments need to grow, especially in SMEs, agriculture, and key industries like petrochemicals and engineering. The country must tackle its recurring balance-of-payments crises by boosting domestic productive capacity in industry and agriculture to reduce reliance on imports. The energy sector also needs reform, including privatizing distribution companies and providing targeted subsidies through the Benazir Income Support Programme (BISP). Additionally, the civil service must undergo modernization, including a merit-based recruitment system and a » Read More…
SUMMARY of the Article “High Cost of Living,” by Editorial, Dawn, October 4th, 2024
The article discusses the recent slowdown in the rising cost of goods and services in Pakistan, marking a significant reduction in inflation rates. Headline inflation, which fell to a 44-month low of 6.9% in the previous month, is the result of multiple factors including last year’s high base of 31.4%, falling global oil and commodity prices, stabilization of the exchange rate, reduced demand due to decreasing real wages, and strict monetary tightening. Pakistan’s inflation outlook is looking better, with both core inflation and the three-month average inflation rates dipping into single digits, suggesting a slowdown in imported inflation, especially for items such as energy and food. The State Bank of Pakistan (SBP) has responded to these developments by cutting borrowing costs to 17.5% since June, and private businesses are now advocating for an even more aggressive reduction in interest rates in upcoming months. The editorial also mentions the government’s recent initiative to repurchase costly debt maturing in December at a lower interest rate, reflecting expectations of monetary easing. However, the article notes that the overall cost of living continues to rise despite a lower inflation rate, as consumer expenses for goods and services remain high. This is particularly painful for the middle class, who are still struggling with rising grocery prices, school fees, and medical costs. The editorial cautions against the government’s potential temptation to introduce inflationary measures to stimulate growth in an effort to appease the electorate before » Read More…
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