Goodbye 2021, welcome 2022
2021 has been a tough year. January 2021 brought in a massive blackout that left 90 percent of Pakistan without electricity. PIA won in January when a Malaysian court ordered the release of a PIA Boeing 777 which was grounded over a British court case.
In April, Tehreek-e-Labbaik undertook a series of street protests calling on Pakistan to cut diplomatic relations with France. On June 7, Millat Express and Sir Syed Express collided killing 65 and injuring 150.
In August, two bomb blasts-one near Serena Hotel and the other on Sariab Road-shook Queta. The same month there was a suicide attack on a convoy of Chinese crew working on the Gwadar Expressway. In September, there was another suicide attack in Quetta that killed 4 FC personnnel and injured 20 others. In October, Tehreek-e-Labbaik began another series of street protests. In December, Jamiat Ulema-e-Islam (JUI-F) won the mayoral election both from Peshawar and Kohat.
From an economic perspective, 2021 has been the toughest in recent memory. Will 2022 be any better? Here are the top-7 economic challenges that 2021 has thrown up for the country’s leader to tackle.
Inflation: On December 16, Pakistan Bureau of Statistics (PBS) reported that the Sensitive Price Indicator (SPI)-comprising 51 essential items collected from 50 markets in 17 cities of the country-had gone up by a hefty 19.49 percent over the past year. Electricity up by 84 percent; cooking oil up 60 percent; washing soap up by 46 percent; petrol up by 35 percent and onions up by 29 percent.
Trade deficit: In November, our imports stood at $7.9 billion and exports amounted to a meager $2.9 billion resulting in an unprecedented monthly trade deficit of over $ 5 billion.
Rate of Interest: The rate of interest that stood at 7.5 percent was hiked to 8.75 percent in November and then to 9.75 percent in December.
Electricity: On December 9, the National Electric Power Regulatory Authority (Nepra) notified Rs4.74 increase in power tariff. On December 20, the Central Power Purchasing Agency (CPPA) sent in a request to Nepra to raise the tariff by Rs4.33 per unit.
Budget deficit: On December 10, the SBP reported that the “government’s borrowing for budgetary support surged 108 percent to Rs104 billion during the first five months of the current fiscal year.”
National debt: Pakistan’s debt and liabilities crossed the Rs50 trillion mark for the first time in our history. For the first 61 years, we accumulated 12 percent of the total debt and over the past 13 years we have managed to add 88 percent of our total debt.
Rupee devaluation: During PPP’s 5 years (2008-2013), the rupee went down by 20 percent (against the dollar). During PML-N’s 5 years (2013-2018), the rupee went down by 26 percent. Over the past 40 months of PTI the rupee has lost 48 percent of its international value.
Will 2022 be any better? Will the rate of inflation come down? In November 2021, PBS reported that the Wholesale Price Index (WPI) on a year-over-year basis increased by a whopping 27 percent. That surely means that the rate of inflation at the retail level is going to get worse. Plus, the upcoming Mini Budget that will withdraw Rs350 billion in tax exemptions will convert to higher inflation-rather than lowering prices.
Will 2022 be any better? Will the trade deficit come down? The government is trying to curtail imports in order to cut the trade deficit-but this is exactly what we have tried over the past three decades and failed.
Well, the trade deficit will come down if the international price of oil takes a dive-but that’s a hope not a plan. So, the government strategy to bring down the trade deficit is really a plan-not a strategy.
Will 2022 be any better? Will the rate of interest come down? Well, the SBP’s only strategy to bring down the rate of inflation seems to revolve around the rate of interest.
And if the rate of inflation isn’t coming down don’t expect the rate of interest to come down either.
Will 2022 be any better? Will the electricity tariff come down? Well, the most recent tariff increases have been under the head of ‘fuel adjustment’ and if the international price of oil comes down we might get some relief in the tariff but, once again, that’s a wish and a hope not a strategy.
Will 2022 be any better? Is the budget deficit about to come down? To be certain, there has been a respectable increase in tax collection but there are two problems here: government expenditures are increasing at a very rapid pace and most of the increase in tax collection has been from higher imports than from anything else.
Will 2022 be any better? Is the national debt going to come down? The only hope here is massive privatization.
Once again, that’s a hope the government really does not have a strategy. Will 2022 be any better? Is the rupee going to strengthen against the dollar? Well, there’s some hope here and the hope is that the rupee will not weaken at the rate that it has over the past few months.
The most recent IPSOS survey found that as many as “87 percent of Pakistanis believe the country is headed in the wrong direction.” 2021 was tough. 2022 is looking even tougher. Tighten your belt; spend less money than you did before.
Tighten your belt; try and manage without things because you will have less money than you used to have. Remember; belts have holes that are used to make the belt tighter.
