### 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 Since it is already past this date, some information may be outdated.
The debt-ridden Pakistan International Airlines (PIA) is facing potential closure and has requested emergency funds to pay its creditors, but the government's plan to privatize the airline is likely to face opposition from its staff and executives; PIA's debt and liabilities have surpassed its assets by five times, and its annual losses are projected to increase significantly by 2030.
The Pakistani government has issued new debt of over Rs2.5 trillion in the first three months of the current financial year to address its rising fiscal deficit, indicating a reliance on domestic sources as external financing decreases and revenues decline.
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's central government debt has risen by almost a third to reach close to Rs64 trillion, with domestic debt accounting for most of the increase and impacting funds available for development and economic growth.
Gas tariffs are set to increase by up to 100% for different consumers in Pakistan to control mounting circular debt, fulfilling IMF conditions but potentially fueling inflation.
Pakistan's ability to generate dollar loans has decreased in the past two months, resulting in the depreciation of the local currency against the US dollar. In the first quarter of the current fiscal year, Pakistan secured $3.52 billion from multilateral and bilateral creditors, but commercial loans and international bonds have not been successful. The government must secure $14.1 billion in the remaining three quarters to maintain comfortable foreign exchange reserves and avoid a balance-of-payments crisis.
