Every time there is turbulence during a flight, people pray to Allah that they will be better persons should the plane land safely but once it does, all of them normally go back to their same old ways. Every time the Pharaoh was sent a crisis from Allah, he would ask forgiveness for his sins but once it was granted would revert back to his old ways. The parables of the past are an important reminder that human psychology in certain aspects has changed little over the centuries. Ironically, same can be said about Pakistan’s economy and politics which is nothing more than a plane crash in slow motion being witnessed by 230 million people who are sadly on board this plane. Even bigger tragedy is that an accountant, not an experienced pilot is flying this plane which in any circumstances should be a big enough red flag for those on board as this plane spirals downwards to crash somewhere over the Arabian Sea. One can see this accountant hoping and praying for miracles while blaming the previous pilot for the current situation facing the plane but displaying little ability himself to steer the plane out of impending doom. This certainly is the most confidence shattering thing amongst this entire crisis that is hurting the mental peace of 230 million citizens of this country.
Much like all third world regimes, civil or military elite of Pakistan borrows heavily for vanity projects and state subsidies but eventually runs out of money to continue financing them and starts looking again towards its foreign friends for bail outs to continue this unsustainable lifestyle. Like a local person who lives on handouts from his relatives living abroad, our state relies on the graciousness of the red dragon in the North or that of the custodian of the holy houses in the West for example, to avoid undertaking painful structural and lifestyle changes that would finally make us independent and stand on our own two feet. However, this time around it seems that none of the rich foreign relatives or any of the multilateral donor agencies is willing to dole out dollars without the necessary reforms so that they can finally rid themselves of the responsibility for the man-child that Pakistan has become.
Our Finance minister’s fetish of propping up the currency artificially has had disastrous consequences for dollar inflows by reducing exports and remittances with over a billion dollars monthly loss being incurred by the state. It has derailed the IMF package and halted billions of dollars of related inflows from friendly countries for the past several months and has brought the country to the brink of default. The situation was similar in late 90’s as well as during his tenure from 2013 to 2018 when propping up the rupee artificially cost us 30 billion dollars and we ended up almost crashing in 2018 before bail outs from China, Saudi Arabia and the IMF saved us. It seems almost comical now that we were told this pilot is the most experienced and capable with plenty of success in preventing planes from crashing when he wasn’t even a pilot to begin with. However this is Pakistan and ultimately personal connections matter more than any real competency.
The situation is now that weekly inflation is touching 30% whilst annual inflation is around 27% officially. All imports are stuck at Karachi port due to lack of dollars to open Letters of credit. Factories across all sectors are shutting down, from Toyota to Kohinoor Textile Mills, with millions of workforce now unemployed. Several companies in the pharmaceutical sector have left the country permanently leaving behind unemployment and shortage and increased prices of many medicines. Medical equipment and supplies are also stuck at ports which will soon turn into a major crisis for hospitals once they run out of essential supplies in next 3 to 4 weeks. Import of cooking oil, which accounts for almost 90% of our total consumption, has also stopped. Regardless of which came first, the egg or the chicken, soon the question will be whose price will increase first as the poultry feed is also stuck at ports.
It is imperative to immediately follow IMF recommendations and put aside personal egos to ensure that the dollar inflows resume once again. Energy prices of both gas and electricity need to be increased to tackle the 4000 trillion rupees in circular debt in both sectors. Both these resources should not be sold below cost as they have been for past decades and line losses need to be curbed effectively to ensure debt is reduced. The currency controls also need to be abolished and sectors like retail need to be brought under the tax net in order to make up for revenue shortfall which is more than 400 billion rupees compared to the IMF target. All state owned assets from RNLG power plants to steel mills to government owned foreign properties need to be sold off immediately to generate 4 billion dollars in the short term whilst debt rollovers need to be negotiated with bilateral and multi-lateral lenders for the 75 billion dollar debt that is due to be repaid in next three years. A new IMF program will be needed after this one ends since there is no way Pakistan can make these debt payments without it. Ensuring that we run current account surpluses in the next three fiscal years as well as fiscal surpluses is also a must to reduce pressure on our currency and economy.
If those at the control tower do not intend to change the accountant flying the plane, at least they can make him listen to the advice of his fellow copilots in the IMF and undertake emergency steps to avoid a crash landing, although this time the passengers would continue to suffer from post traumatic stress disorder for many more years to come even if the plane manages to land safely.
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