DECODING THE DEFAULT

Pakistan’s defaulting on its debt became more prominent every day as citizens still expected a miracle to take place, pushing the default for months or weeks. Few others took a much more practical stand and suggested some debt restructuring with lenders through rescheduling and refinancing. The defence minister on the other hand revealed how the nation is almost on the verge of going bankrupt. He even emphasized that the government alone could resolve economic turmoil and that dependence on the International Monetary Fund (IMF) would not yield any fruitful results sooner as no assistance has been announced so far. Such a relief fund, if sanctioned can do a great deal of favor for the country by attending to the immediate needs. Nevertheless, an unstable government system would only aggravate the implementation of corrective policies, which otherwise would have helped preserve large portions of finance.

A few days later, even a New York-based global rating agency called Fitchcut reduced Pakistan’s sovereign credit rating by two points, indicating the evident downfall

IMPACT AT THE INDIVIDUAL LEVEL:

Narrowing down how the confidence of households is affected, it was observed that at adequate aggregate demand levels, the supply of electricity, food, healthcare, and fuel was compromised. This in turn resulted in plummeting prices for essential commodities. Importing the raw materials and machinery to keep the manufacturing sector running seemed to be a walk on thin ice.

As supply was stagnant, stocking up more produce did not make sense and factories were heading towards a complete shutdown, further jeopardizing jobs and the nation’s export-oriented production. The service sector, on the other hand, fell into the clutches of default as there was a severe shortage of foreign currency and decreased demand for the sector.

IMPACT ON BUSINESSES:

The expenditure burden on the household keeps increasing as diesel per liter was hiked up by Rs. 17.20 to Rs 280. Kerosene saw a hike of Rs 12.90 to Rs. 202.73.

The country is barely surviving on $3.19 billion worth of currency in its foreign exchange reserves. The amount still stands less than what would be required to pay for imports, leaving huge quantities of supply containers stranded in the ports. Halted production due to inaccessible raw materials and inflation, making commodities beyond the reach of purchasing power has been snatching away food from the common man’s mouth.

WAY OUTWARD:

To maintain the federal revenue reserves to pay loans, and least spend the same for public expenditure, taxes rates have been unreasonably hiked. A huge amount worth 170 billion Pakistani Rupees is said to be the target to be collected as tax revenue over the succeeding few months in the attempt to pull the nation out of debt.

Few potential projects to pump finances from beyond borders would require the energy and refinery policies to be tweaked. Upon this successful implementation, Saudi Arabia is assumed to invest $6-$8 billion in refinery projects. Another project is the gas pipeline that ought to be laid from central Asia to Pakistan which also happens to be a collaborative measure with Kazakhstan, Azerbaijan, and Russia. Should the pipeline become successful, it would place Pakistan in prime focus, drawing international attention and adequate financial influx to fund infrastructural projects.

To ensure in-land stability, an authoritative body responsible for national accountability could be set up to keep a track of the expenditure made and track the implementation process concerning the actual action plan. Maximum transparency should be brought in from the government to prove that every dollar being spent on the nation is being accounted for. This would also eradicate unpleasant political practices to a greater extent, thereby tending to the need of the hour which is bringing back the citizens’ confidence in the political system.