Fitch’s concerns
STUCK in a protracted cycle of stagflation, Pakistan’s economy faces numerous challenges. Some of these pertain to long-standing structural issues such as low tax revenue, a large energy-sector debt, the massive losses of SOEs and low exports.
Others are of a more immediate nature and relate to a weakened balance-of-payments position amid few foreign, private and commercial inflows; they persist despite the new IMF programme.
The continuing political discord is not helping either. No wonder Fitch, one of the three biggest global rating agencies, has emphasised high external funding risks, despite some stabilisation and a strong performance on the Stand-by Arrangement with the IMF, as well as uncertainty regarding the near-term political outlook.
While it upgraded Pakistan’s long-term foreign currency issuer default rating from ‘CCC-’ to ‘CCC’ in July, following the approval of the $3bn IMF loan, the current rating still indicates significant country credit risk.
Fitch believes that Pakistan is facing external funding risks given its high medium-term financing needs. “Pakistan’s overall external funding targets of $18bn (gross) for the current fiscal year were ambitious against nearly $9bn in government debt maturities.
The maturing debt includes a $1bn bond due in April and $3.8bn to multilateral creditors but excludes routine rollovers of bilateral deposits,“ it said, adding that the targeted $1.5bn in Eurobond/ Sukuk issuance and $4.5bn in commercial bank borrowing “will likely prove challenging”.
On the political situation, which has implications for the economy, and the next government’s ability to implement policy reforms and negotiate a new bigger and more long-term bailout with the IMF, Fitch says it expects elections to take place as scheduled and produce a coalition set-up.
However, it is concerned over the uncertainties surrounding the elections and the ensuing potential political volatility, which could impact the implementation of structural reforms and pose economic challenges.
“We expect elections to take place as scheduled in February and a follow-up IMF programme to be negotiated quickly after the nine-month SBA finishes in March 2024, but there is still the risk of delays and uncertainty around Pakistan’s ability to do this,” it said.
The underlying message Fitch has sent across is clear: Pakistan’s political conditions post elections will determine its economic trajectory. The concern is not without valid reason. We have a long history of ditching and reversing reforms agreed with the IMF and other lenders.
Political consensus on measures crucial to ensuring sustainable growth dissipates once economic and external conditions start to show improvement in the wake of rising foreign inflows.
However, political discord and volatility arising from a vote sans credibility will likely increase the chances of the next government digressing from the path of reforms long before the economy stabilises. That would be disastrous for the country.
Published in Dawn, December 15th, 2023
Weak cases
HOPE dies every day in Pakistan. In 2015, Kasur’s child sex scandal — a child pornography ring in Hussain Khanwala district had sexually exploited 285 minors — rocked the nation. On Wednesday — eight years after mass repulsion, protests and an HRCP fact-finding report, which stated that police inaction pointed towards collusion with criminals and found the role of political parties “very disturbing” — the Lahore High Court acquitted three convicts serving life sentences in the child abuse case. Their counsel said that out of six prime suspects, three had been released earlier and the remaining have been exonerated now. He claimed that they were not “conclusively identified” in the forensic tests of the video, the Anti-Terrorism Act sections were not applicable and medical reports did not corroborate the evidence. So, the moral of this story is an old one: the victims were betrayed by police and prosecution.
What should have happened after the horror unfolded was an immediate review of the law-enforcement plan to prevent feeble investigation and forensic inquiry by police. Moreover, prosecutors should have the legal authority to ensure that probes are executed according to the requirements of a case. And, as the agency taking the police’s case to the courts, it should become mandatory for prosecutors to keep a record of their work for solid cases to be presented before lower legal fora. Ravaged by corruption and exploitation, police and prosecution, when representing the poor, either end up aiding criminals in hoodwinking the justice system or punish the innocent. To make matters dire, despite repeated incidents of monstrous abuse, the system remains untouched by any reform. The question is: as the progeny of hapless daily wagers, are Kasur’s victims easier to overlook? Children, sans expression, authority and support to face abusers, form the most vulnerable section of society. For this reason, provincial and federal authorities must work harder to banish the curse of stolen innocence.
Published in Dawn, December 15th, 2023
Battlefield Lahore
LAHORE is battling a severe smog crisis, one that refuses to let up and one that is keeping it at the top of the world’s most polluted cities. Earlier this week, the city was shrouded in fog so noxious, the Air Quality Index in two areas was five times more than safe levels. These statistics are a grim indicator of the perilous air the city’s residents are forced to breathe. Vulnerable children and adults are besieged by a host of health issues — persistent cough, breathing difficulties, eye irritation and headaches — that are now part of daily life in Lahore. The roots of this crisis stem from vehicular emissions, industrial pollution, crop burning, and a lack of effective waste management. This toxic cocktail is choking Lahore and is a testament to the government’s ineptitude to address this protracted health emergency. The WHO’s guidelines for PM2.5 is an annual average of 10. Lahore’s average, however, stands at a staggering 269, nearly 27 times higher than recommended levels. This is not just an environmental crisis; it is a humanitarian disaster.
The Punjab HEC’s recommendation to adopt the Regional Clean Air Incentives Market (RECLAIM) programme, similar to what the US implemented, is a commendable one. This programme has shown effectiveness in reducing emissions through a cap-and-trade system, providing a framework that could be tailored to Lahore’s unique challenges. However, adopting RECLAIM alone is not the panacea. The root causes of air pollution in Lahore need addressing. This includes stringent regulations on industrial emissions, a shift towards sustainable farm practices, modernising all the brick kilns — down to the last one — and promoting public transportation to reduce vehicular emissions. Moreover, raising public awareness about the health impacts of air pollution and ways to reduce personal exposure is crucial. The time for platitudes and half-measures — like the chief minister’s supervision of streets being washed — is over. The government must act decisively and immediately. The health of Lahore’s citizens cannot be held hostage to bureaucratic inertia and political indifference. The implementation of RECLAIM, along with a comprehensive environmental strategy, is not just a recommendation; it is a necessity. The smog that continues to blanket Lahore is a stark reminder of the cost of inaction. The government must wake up to the reality and take bold steps to ensure clean air for all.
Published in Dawn, December 15th, 2023