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SUMMARY of the Article “Climate-smart finance bill,” by Ali Tauqeer Sheikh, Dawn, June 20th, 2024

The article criticizes Pakistan’s proposed finance bill for the next fiscal year for its lack of commitment to climate resilience, despite the country being highly vulnerable to climate change. The bill does not set a direction for sustainable economic development or climate-resilient investments and overlooks the need for institutional and policy reforms to address economic damages from climate-induced disasters. The government has instead chosen a simplistic approach to generate revenue by cutting subsidies, with little focus on economic development or climate resilience. Key government entities, such as the Planning Commission and the Finance Ministry, have failed to integrate climate considerations into their budgeting and reporting processes, resulting in a lack of climate-smart budgeting. Comparisons are drawn with Bangladesh, which has made significant strides in climate-proofing its budget and establishing climate funds and frameworks to support climate resilience. Pakistan is urged to adopt similar measures, including tracking climate-related expenditures, aligning budgetary processes with national climate policies, and exploring innovative green finance mechanisms like green bonds and debt-for- » Read More…

SUMMARY of the Article “Leadership, crisis, opportunity,” by Maleeha Lodhi, Dawn, June 17th, 2024

Pakistan is currently at a critical juncture, grappling with numerous crises, including political polarization, economic instability, and institutional degradation. This multifaceted crisis, or polycrisis, involves overlapping issues in governance, economy, politics, security, and human development, all reinforcing each other and creating a formidable challenge. National morale is low, with a significant portion of the population believing the country is heading in the wrong direction. Unlike previous crises that Pakistan has managed to overcome, the current situation is exacerbated by decades of poor governance and missed opportunities. Immediate reforms, particularly economic ones, are essential to address these structural issues. A significant gap persists between the challenges faced and the responses provided by successive governments, which have lacked a » Read More…

SUMMARY of the Article “Climate debt trap,” by Jamil Ahmad, Dawn, June 15th, 2024

The article explores the severe challenge of heavy and rising debt faced by developing nations, which significantly hampers their efforts to tackle climate change, reduce poverty, and pursue economic development. Between 2010 and 2022, the external debt of 118 low- and middle-income countries doubled to $3.1 trillion, constituting about 15% of their GDP. In 2022 alone, these countries spent $443 billion servicing public debts, with this figure expected to rise in the coming years. Factors such as inflation, high interest rates, the energy crisis, and economic uncertainty post-COVID-19 have exacerbated this situation. The high debt service payments limit the fiscal space necessary for investments in climate action and sustainable development, pushing many developing nations toward default. This liquidity crisis sidelines climate and environmental priorities, posing global risks including exacerbated poverty, food insecurity, water scarcity, and health issues. To address this, immediate debt relief is suggested, freeing up fiscal space for climate and development investments. Options include lowering borrowing costs, extending long-term loans, and debt swaps for climate actions. The V20 group of climate- » Read More…

SUMMARY of the Article “Budget and politics,” by Dawn Editorial, June 14th, 2024

The article critiques the recent budget presented by Finance Minister Muhammad Aurangzeb, highlighting a disconnect between his stated ambitions and the actual measures proposed. Aurangzeb had expressed a commitment to raising Pakistan’s tax-to-GDP ratio to 13% within three years, emphasizing the need to expand the tax base rather than relying on charity. However, the budget reveals a reliance on traditional methods that target existing taxpayers, particularly the salaried class and documented businesses, rather than significantly broadening the tax base. While the budget does propose the removal of certain tax exemptions » Read More…

SUMMARY of the Article “State of the economy,” Editorial, Dawn, June 13th, 2024

The editorial examines the state of Pakistan’s economy for the outgoing fiscal year as depicted in the new Pakistan Economic Survey. It suggests that while there has been some stabilization in key macroeconomic indicators, this stability is fragile and heavily dependent on IMF support, which necessitates yet another larger bailout. The finance minister acknowledged this vulnerability at the survey’s launch. Although the economy appears to have hit rock bottom in the last financial year, the slight improvements in macro indicators this year are seen as progress. However, this does not offer much hope for the future. The editorial highlights that the economy likely expanded by only 2.4%, slower than the population growth rate, driven primarily by increased output in cotton, wheat, and rice crops rather than industrial recovery. Agriculture saw a growth of 6.3%, the fastest in two decades, but its reliance on major crops highlights structural weaknesses. The industry and services sectors expanded by just 1.2% each, meaning no new jobs were created to accommodate the growing workforce. The government managed to reduce the current account deficit to $200 million in the first ten months against a $6 billion target for the year, avoiding a default on foreign payments and building international reserves to $9 billion, which stabilized the » Read More…

SUMMARY of the Article “Negotiating effectively with IMF,” by Saeed Ahmed, Dawn, May 31st, 2024

The article delves into the complexities of Pakistan’s negotiations with the IMF for a new Extended Fund Facility (EFF) following the completion of the ninth-month Stand-By Arrangement (SBA). Given Pakistan’s ongoing fiscal and external vulnerabilities, another EFF appears necessary amidst rising political instability. IMF programs, characterized by ‘conditionality,’ require borrowing governments to undertake economic reforms. Effective IMF programs hinge on negotiations and a medium-term economic agenda owned by the borrowing country’s authorities, which should address root economic problems without alienating domestic interests. The professional and ideological alignments between IMF staff and borrowing government officials significantly impact negotiation outcomes, often resulting in larger programs with fewer conditions when ideological ties are strong. Pakistan’s past experiences, particularly during the 2019-2023 EFF program, » Read More…