### Summary
Pakistan's real estate sector has experienced a significant rise in property prices, largely due to the influx of black money. This has resulted in high costs that prevent genuine buyers from affording a home, while only benefiting the "investors" who hoard black money.
### Facts
- 💰 The excessive placement of black money in the real estate industry has caused property prices to skyrocket in Pakistan.
- 🏘️ Genuine buyers are unable to afford their own houses or apartments, as the cost is beyond their means.
- 🏦 The government loses out on tax revenue, while the common man loses their dream of owning a home.
- 📝 Property values are often underreported, and the majority of the payment is settled through under-the-table transactions, making tax collection difficult.
- 🔍 Weak supervision by the government allows black money to flow into the real estate sector, creating significant disruptions and distortions in prices.
- 💼 Investment in real estate could be redirected towards more productive sectors, such as consumer goods and export-oriented businesses, benefiting the genuine investor, generating tax revenue, and providing employment opportunities.
- 🛠️ The government should implement stricter measures and enforce reporting requirements to stabilize property prices and allow the common man to dream of owning a home again.
- 💸 Investing in sectors that produce goods and generate employment is crucial for bridging the supply-demand gap and stabilizing market prices. This would enable consumers to access competitively priced goods.
### Summary
The caretaker government in Pakistan has several key challenges to address, including managing the economy, stabilizing the currency, ensuring energy security, and attracting foreign investments.
### Facts
- 📉 The transition period until the next elections is expected to last five to six months, and the caretaker government must not be complacent in addressing economic issues.
- 🧱 A capable team, including a central banker, a veteran bureaucrat, and an expert planning commissioner, has been appointed to lead the Special Investment Facilitation Council (SIFC) and tackle political interference.
- 💱 The depreciation of the Pakistani rupee against the US dollar is a concern, and measures should be taken to discourage hoarding and build up net international reserves.
- ⚡️ Energy security is critical, and immediate actions should be taken to ensure full recovery of costs in the gas and power sectors. Direct cash transfers and full recovery of taxes in the electricity and fuel prices may be necessary.
- 💸 Negotiating a new IMF program is expected after the current program expires, and efforts should be made to attract investments from friendly Arab countries under the SIFC.
- 📊 Improving the fiscal side of the economy is essential, including widening the tax net, targeting untaxed income, and digitizing the tax collection process.
- 🗳 The caretaker government should focus on effective governance and decision-making, setting an example for the next government. The cabinet's performance will be judged on how well they manage the economy.
- 🌍 Restoring confidence in Pakistan's economy and addressing key indicators such as investments, inflation, fiscal prudence, and circular debt are essential for a stable future.
Note: The text provided contains a mention of the publication date (August 21st, 2023). Since it is already past this date, some information may be outdated.
Pakistan's caretaker Prime Minister, Anwaarul Haq Kakar, expressed confidence that the country will overcome its economic challenges, emphasizing the need to bring the undocumented economy into the tax net and invest in human resources, during an interaction with a delegation of students from Harvard. He also discussed Pakistan's role in the USSR-Afghan war, highlighted the importance of democracy and emphasized the desire to establish a collaborative partnership with the US.
The article highlights the economic crisis in India in 1991 and draws parallels to the current state of Pakistan's economy, emphasizing the importance of focusing on economic growth and addressing the needs of the deprived sections of society.
Pakistan's recent financial aid and investment partnerships, including with the IMF, Saudi Arabia, UAE, and China, provide temporary relief from economic challenges, but the country must address issues such as low growth, high inflation, unemployment, and limited foreign exchange reserves through deregulation, investment in education and technology, tax reform, privatization, and political stability to achieve lasting prosperity.
Pakistan's interim finance minister, Shamsad Akhtar, has stated that the country's economic situation is worse than expected, and ruled out subsidies for the people due to non-negotiable commitments with the IMF and strict conditions of the $3 billion loan received in June.
The relentless surge in pressure on the exchange rate and price level in Pakistan over the past two and a half years can be attributed to serious malfunctions on the balance of payments and fiscal accounts, which have thrown the monetary aggregates far from their projected path to stability. This has led to inflation and exchange rate pressure, and traditional IMF-mandated adjustments alone may not be enough to resolve the situation.
Pakistan is governed by a complex web of influential entities, including the military establishment, IMF and bilateral donors, powerful business elites, the religious right, and the people, making it difficult for meaningful relief and democratic transition to occur.
Pakistan's economy has experienced a slowdown in its structural transformation, with a significant decrease in the share of agriculture and a lack of growth in the industry sector, indicating a premature de-industrialization contrary to successful developing nations, emphasizing the need for policies to boost industrialization and address taxation inequities.
Pakistan's economic crisis is worsening under the caretaker government, as LPG prices increase by 20% and the rupee continues to fall.
Former finance minister Ishaq Dar believes that a few speculators are responsible for the fluctuation and rise of the US dollar against the Pakistani rupee and that the government must take action against them to prevent them from holding the economy hostage. He also states that there is no quick fix to any problem, and emphasizes the need for the revival of effective policies and time to reverse the damage caused to Pakistan's economy. Additionally, Dar criticizes the policies of the Pakistan Tehreek-e-Insaf (PTI) government and expresses confidence in the ability of the Pakistan Muslim League-Nawaz (PML-N) to fix the economy if given a fresh and full mandate. He also highlights the complexities of the rise in electricity prices in the country.
A senior US official has urged Pakistan to undertake energy reforms and opt for renewable energy sources in order to break the cycle of debt and international financing, and ensure economic stability and competitiveness in the future. The official emphasized the need for strong leadership and patience in implementing these reforms.
The current economic crisis in Pakistan is driven by high inflation, mismanaged policies, and failure to ensure price stability, leading to a weakened currency and a struggling middle class, but implementing radical reforms such as demonetization and swapping out foreign currency debt can potentially alleviate the situation and revive the economy.
The main problem with electricity consumption in Pakistan is that households, rather than productive sectors like industry, are the main consumers, leading to high bills and a lack of economic growth.
Despite claims of massive foreign investment pouring into Pakistan, the country's economic woes and obstacles, such as deteriorating law and order, make it unlikely that these investments will materialize and bring about significant change.
Pakistan's civilian and military leaderships are optimistic that Gulf states, particularly Saudi Arabia, will invest billions of dollars in the country to alleviate its cost-of-living crisis, but doubts remain about the feasibility of these projections and the need for economic reforms and stability.
Pakistan's ongoing economic woes, including budget deficits, trade deficits, and foreign exchange shortages, are not solely caused by corruption but rather a lack of will from leaders to implement necessary solutions and prioritize economic growth, such as increased productivity, better-managed state finances, and global competitiveness, while shedding unproductive state-owned enterprises. The country must also embrace economic pragmatism by opening trade with all countries, investing in human capital, and avoiding ideological distractions to achieve economic modernization.
Millions of Pakistanis are facing the devastating consequences of an unprecedented economic crisis, with rising inflation, soaring fuel and electricity prices, and a weakening currency, leaving low-income households struggling to make ends meet.
Pakistan's interim government is prioritizing economic revival and fulfilling international obligations, including agreements with the International Monetary Fund (IMF), to address the stagnant economy and financial issues. They aim to improve the overall business and investment environment, increase inflow of dollars from multilateral institutions, and reduce expenditures while upholding international agreements.
The Pakistani rupee has depreciated significantly in the first three weeks of the interim government's tenure, reaching a record low and making it the worst-performing Asian currency this quarter, due to factors such as a change in government and high inflation. The State Bank of Pakistan is implementing measures to address the economic challenges, including reforming the exchange rate and modernizing the banking system.
The caretaker government of Pakistan has raised petrol and diesel prices to record levels, leading to a surge in inflation and impacting the prices of essential commodities, while the country continues to invest in and expand its nuclear weapons program.
Despite Pakistan's immense potential in various sectors such as energy and agriculture, the country continues to face economic injustice and elite capture, which undermines social justice and human development, according to economist Dr Hafiz Pasha; in recent months, however, the government has taken action against electricity theft, currency smuggling, and commodity hoarding to combat these issues.
Former Pakistani Prime Minister Nawaz Sharif criticized his country's poor economic condition, comparing it to India's success in reaching the moon and stating that Pakistan has been reduced to begging for dollars while India's economy has prospered. Sharif also claimed that the Indian government had copied his economic reform order from 1990 during their own reforms in 1991. He blamed Pakistani generals for the country's plight and labeled them as the worst enemies of Pakistan.
The worsening economic situation in Pakistan is causing the poor, honest, and innocent people to struggle to survive, leading to dire consequences.
Pakistan's poverty rate has risen to 39.4% with 12.5 million more people falling below the poverty line, prompting the World Bank to urge the country to take urgent steps to achieve financial stability by taxing agriculture and real estate and cutting wasteful expenditures.
Pakistan is facing a major economic crisis with high inflation, insufficient public resources, and policy decisions influenced by vested interests, according to the World Bank. The country needs to make hard choices and prioritize coordinated, efficient, and adequately financed service delivery to improve human development outcomes. Additionally, the Pakistani Rupee has reached a record low against the US dollar.
The World Bank warns that Pakistan is facing mounting woes and economic hardships, including inflation, rising electricity prices, severe climate shocks, and a 'silent' human capital crisis, while urging the incoming government to make crucial decisions themselves.
Short-term inflation in Pakistan reaches new high as retail prices of petroleum products soar, leading to increased transport fares and higher cost of moving goods; prices of essential vegetables also see a rise, except for tomatoes which experience some relief after the reopening of the border with Afghanistan.
Stefan Dercon, a visiting professor at Oxford University, says that Pakistan's elite must change in order to revive the economy and reduce dependence on foreign currency inflows, as maintaining the status quo will not provide a solution, and the IMF and other bilateral donors will not rescue the ailing economy.
The economic status quo in Pakistan is deemed untenable by Professor Stefan Dercon of Oxford University, who emphasizes the need for sensible macroeconomic policies and alignment between politics and economic policies for long-term growth and development.
The author argues that there are underlying pressures responsible for an ongoing spiral of devaluation in Pakistan's economy, and these pressures make it difficult to sustain recent gains in the value of the rupee.
India's External Affairs Minister, S Jaishankar, indirectly referred to Pakistan's crisis and stated that it is facing long term issues due to various factors and mistakes in its economic progress, while highlighting India's regional cooperation efforts and the exceptional situation of the dormant SAARC due to one member's support of terrorism.
The inflationary environment in Pakistan is causing significant challenges for small businesses, particularly those run by women entrepreneurs, forcing them to raise prices or take out loans to manage expenses and protect profit margins, resulting in declining sales and financial hardship.
An obsession with controlling the rupee-dollar exchange rate in Pakistan has led to ineffective administrative measures and failed attempts at stabilization, as the country's heavy dependence on imports and mounting external debt hinder economic restructuring and contribute to the rupee's depreciation. The need for a long-term plan focused on increasing exports, investment, and macroeconomic stability is emphasized.
The high cost of electricity in Pakistan is due to poor governance, policy lapses, volatile global energy prices, and rupee devaluation, leading to inflated energy costs, a lack of dispatching excess power to consumers, and inadequate transmission and distribution systems; to address these issues, the government should implement a multifaceted strategy that includes shifting to local renewable energy sources, upgrading and modernizing the power supply network, promoting energy efficiency and conservation measures, and offering subsidies and tax exemptions for renewable energy technologies.
The government of Pakistan is preparing to increase gas tariffs across various sectors, including residential, fertiliser, export, and commercial, in order to tackle the rising circular debt in the gas sector and address the unsustainable nature of the industry.
Pakistan needs to reevaluate its geopolitical and economic strategy, prioritizing sustainable and inclusive economic growth and embracing trade with India in order to address its debt and accelerate development, with potential benefits including increased exports and improved energy supply. India should also play a proactive role in normalizing trade relations with Pakistan, as it shares an interest in a peaceful border and stands to gain commercially from a strong relationship. A trade-centered approach could align with Pakistan's military and contribute to its long-term security and national development.
Pakistan is facing a social and economic crisis, with challenges such as low foreign direct investment, decreasing exports, high debt, inflation, and lagging development, and policymakers need to take decisive action to address these issues and prioritize national interests and security, including political stability, diplomatic initiatives with neighboring countries, and investment promotion measures.
Pakistan's economy is in dire straits, heavily reliant on external assistance and loans, with rising inflation, high poverty rates, and a plummeting Human Development Index, yet the country's military-owned enterprises continue to thrive, maintaining extraordinary financial control and leveraging their autonomy for corruption and lack of accountability.
The World Bank has recommended that Pakistan tax the agricultural and real estate sectors and merge the thresholds for the salaried and non-salaried class in order to generate revenue and reduce fiscal deficits, while protecting the poor.
Pakistan is facing a poverty crisis, with 40% of its population living below the poverty line, according to the World Bank.
Pakistan needs to dispel four myths and adopt a reform agenda in order to access and leverage international climate finance through partnerships with the private sector and a focus on climate-smart development, as the global landscape has shifted towards lending and investments rather than grants.
