With the Opposition Tehreek Tahafuz Ayeen-i-Pakistan launching an anti-government movement on Saturday with a rally in Piishin, in Balochistan province, and with Finance Minister Muhammad Aurangzeb leaving for Washington to attend the annual meeting of the World Bank, but perhaps more importantly to negotiate another bailout package with the IMF, perhaps the last thing the present government wanted was the Asian Development Bank report which said that Pakistan had the highest cost of living in Asia, and predicted 25 percent inflation in the current fiscal year, and GDP growth of 1.9 percent. It should not be forgotten that the present government, when in office in 2021-2022, was widely criticised for being unable to tame inflation. That was supposed to have been the main reason for the strong performance of the PTI-backed independents in the recent election. The inflation’s painfulness has had at its core the increases in the electricity, fuel and gas rates, which have been seen as imposed by the IMF. Thus Mr Aurangzeb’s success at the new IMF talks will inevitably be directly linked to poverty.
Though inflation is punishing, the low growth which accompanies it puts it in a stagflationary situation for the economy. That implies that, along with the persistent increase in prices, the economy is not growing, and thus jobs are not being created. That not only means that the youth bulge is finding it harder to get a job, but these youth are not able to bring an income to the home, which would enable it to tick over. This youth bulge unemployment is another factor which bolstered support for the PTI-backed independents, and is one major reason why the Shehbaz government wants to engage in expansionist policies. Notably, the record 21 percent at which the State Bank is maintaining its policy rate is something the government would like to bring down. However, the IMF is likely to insist on keeping the rate where it is until inflation falls below it. The ADB sees a gradual slowing of inflation, to 15 percent in the next financial year, and that too only if Pakistan sticks with the present IMF-dictated policies.
It is not as if the opposition alliance has the solution. Ostensibly the campaign is against the rigging of the election, not the economy, but the implicit message is that the opposition would do a better job of economic management. The opposition parties have a record of nationalist self-assertion, not of careful economic management. However, the government feels the pressure building, both in Pishin and Washington.
