A perfect storm is brewing | By Farrukh Saleem


A perfect storm is brewing

Our governments over the past decades have done three things: budget deficits, trade deficits and demolition of institutions.

Each and every Pakistani is now bearing the cost of governmental blunders spread over the past decades in the form of an annual rate of inflation at 30 percent and total debt and liabilities at Rs62,500 billion.

Lo and behold, 38 percent of Pakistan’s population is ‘multidimensionally poor’ and an additional 12.9 percent is ‘vulnerable to multidimensional poverty’. Wow, more than 50 percent of Pakistan’s population is either ‘multidimensionally poor’ or is ‘vulnerable to multidimensional poverty’. That is 1 out of every 2 Pakistanis.

A perfect storm is brewing. Look at the most recent data: business confidence is now lower than it was at the peak of the COVID-19 pandemic; 88 percent businesses think that Pakistan is heading in the wrong direction; sales of petrol and diesel are down 18 percent and 25 percent, respectively; cement dispatches have declined by 19 percent; furnace oil sales are down 37 percent and passenger car sales are down 36 percent.

A perfect storm is brewing. Look at the most recent data: we have to pay back $22 billion on account of our external debt and we are going to incur a loss of $12 billion on the account of our current account deficit. That’s a gross external financing need of $34 billion.

In addition to that, according to the World Bank, the “floods will require $16 billion in recovery and reconstruction costs, the secondary impact from disease, lack of food and clean water are yet to come.”

A perfect storm is brewing. Look at the most recent data: net reserves with SBP (State Bank of Pakistan) have fallen from $19 billion in September 2021 to $7.9 billion as of November 2022. The reserves currently cover about a month worth of imports.

Imagine, Pakistan’s perceived risk of default, as measured by the 5-year Credit Default Swap (CDS), has gone up from 10 percent in April to 75 percent in November. Imagine, Pakistan’s perceived risk of default is about the same as that of Sri Lanka.

We will now be forced to do four things: go for bilateral rescheduling, multilateral repurposing, climate related funding and approach IMF’s concessional windows.

A perfect storm is brewing. Is anyone bothered? The coalition government is confused with nothing but knee-jerk reactions. The establishment’s ‘hybrid project’ has imploded and the establishment has gone ‘neutral’.

The PTI, the opposition, is nothing but a narrative-generating machine with truckloads of slogans but absolutely no solutions.

A perfect storm is a “meteorological event aggravated by a rare combination of circumstances.”

A perfect storm results in enormous amounts of atmospheric pressure, trees get uprooted, mudslides and landslides occur, severe property damage, thousands die-and all this death and destruction is followed by a severe lack of food and medicines. In Pakistan, the perfect storm that is brewing threatens serious economic devastation.

Is anyone bothered? Imagine, a perfect storm is brewing but all our focus is on three things: the appointment of the Chief of Army Staff, PTI’s long march and Imran Khan’s Toshakhana scandal.


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