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The Print
5 hours ago
- Business
- The Print
Pakistan's economic reforms a pushback against elite but it may backfire
For many, it is a 'wake-up call'. But at the same time, the script is all too familiar. Economic crisis, an eleventh-hour bailout from the International Monetary Fund (IMF), and a promise of sweeping reforms that mostly tank. It is Pakistan's 26th engagement with the IMF in 66 years. Though the government hails the reforms as a 'historic step', economists, industry bodies, and editorials in national dailies have met them with cautious optimism, tempered by warnings of potential economic disruptions. New Delhi: A crippling economy, an impatient IMF and a recent military conflict with India that exposed its vulnerability has introduced a sense of urgency in Pakistan vis a vis economic reform. Tariffs are being slashed. State enterprises are being privatised. Even the agriculture sector, long protected by subsidies and loopholes, is being pulled into the tax frame. 'The recent war with India has added further momentum to the reform efforts. This is because there is a clear belief in Pakistan that the country faces a real and existential threat emanating from the east,' Uzair Younus, Principal at The Asia Group, a strategic consulting firm based in Washington DC, told ThePrint Trade and tariff overhaul The centrepiece of Pakistan's latest reform drive is a dramatic overhaul of its trade and tariff policy. Starting 1 July, the government will begin reducing customs duties and tariff rates across thousands of products, and phasing out protectionist barriers that have shielded local industries. The goal, government officials say, is to push exports, bring foreign investment, and modernise a muted industrial growth. According to the new plan under National Tariff Policy 2025–30, the average import tariff will be halved from 19 per cent to 9.5 per cent over the next five years, with high-impact sectors such as auto, steel, textiles, and plastics facing major disruptions. Economists are calling it a 'pushback against elites in Pakistan'. 'Pakistan's slew of reforms is a 'wake-up call' and has seen greater momentum post the India-Pakistan conflict. It is also a pushback against the elites in Pakistan who have always downplayed reforms,' said Younus. According to Younus, Pakistan has had many IMF bailouts in the past, but its ruling elites have always had the agency to resist reforms under pressure. 'This time around, the likelihood of these reforms going through is higher because this is something senior leaders in the government believe in,' he added. Also read: TLP chief tells Pakistanis to take up arms against India. People call him rioter & a sell-out The skepticism Pakistan's Finance Minister Muhammad Aurangzeb has described the reforms as vital to building an export-oriented economy. Prime Minister Shehbaz Sharif has also championed the effort, calling it 'a new economic direction.' But not everyone is convinced. 'Industry is at a loss for words when describing what is about to happen. The plan is a radical one, no doubt. It may sound fine, but it does run the risk of turning Pakistan into a trading economy, since it will undoubtedly gut large sections of manufacturing, but may or may not spur exports in the way its proponents expect,' Pakistani business journalist Khurram Hussain wrote in a Dawn article. 'Frankly, I am not convinced that the economy can withstand the shock, especially to the reserves, that could come from the sudden surge of imports such a step could trigger,' he added. The IMF's fingerprints are unmistakable on Pakistan's reform push. The country is currently under review for the release of the final tranche of a $7 billion loan programme, and the IMF has made privatisation and structural reform non-negotiable conditions. The IMF projects Pakistan's economy will grow 2.6 per cent this fiscal year, rising to 4.5 per cent annually by 2030, driven by planned fiscal reforms and policy commitments aimed at long-term stability— but only if it adheres to every item on the checklist. The tariff overhaul is a balancing act that is expected to disrupt industries long shielded from global competition, and has few takers for now. Critics have labelled it a 'death knell'. 'For a large number of industries that rely on these duties to make their products competitive against imports, this is nothing short of a death knell. The government is doing this in what it says is a bid to spur exports. The affair began as a duty reduction plan for raw materials and intermediate goods used in exports, but grew in scope as it travelled through the process of consideration and approval until it became a robust trade liberalisation plan,' Husain pointed out. The Pakistan government has yet to release a detailed impact assessment. Critics say this lack of transparency, especially regarding potential job losses and foreign exchange outflows, risks turning a sound economic idea into a political liability. Even Dawn, which called the plan 'a major positive shift' in its editorial, warned that unless accompanied by structural reform and improved governance, the policy could falter. Other concerns loom. Customs evasion, under-invoicing, and smuggling are already rampant. Weak enforcement could allow liberalisation to reward bad actors while penalising compliant businesses. 'The concern is not the policy, it's the capacity to implement it,' Pakistani economist Javed Hassan told ThePrint. 'Without strong governance and investment in human capital, this could backfire badly,' he added. Short-term risks Pakistan's economy is under strain across the board. The power sector is crippled by circular debt, agriculture remains low-yield and untaxed, PIA, the national carrier, is buried in losses, and manufacturing suffers from outdated protectionist policies. State-run banks are inefficient, and food markets are distorted by subsidies and smuggling. Decades of mismanagement and elite capture have entrenched a system built to serve the few. A 2021 United Nations report estimated that Pakistan's elite, including the corporate sector, feudal landlords, political class, and military, receive economic privileges worth $17.4 billion annually, about 6 per cent of the country's GDP. The Business Recorder, an English-language daily in Pakistan, called the reforms 'Pakistan's last real chance to get it right.' But it also warned that failure to crack down on under-invoicing and GST evasion could reverse the reforms. 'There's a growing segment of elites in the country who now accept that the old ways cannot be sustained. As a result, we are seeing a reform orientation across sectors, although it is slow. The downside is that the status quo economy is great for a narrow segment of the elite,' Younus said, underlining the downside. 'The resistance is likely to be real and persistent, and it'll be up to the government and the military to not lose sight of the reasons why the status quo cannot be sustained,' he added. That resistance is already visible. Business groups like the Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) are warning of mass layoffs. Meanwhile, the Karachi Chamber of Commerce and Industry (KCCI) has cautiously supported the reforms, pointing out that high tariffs have only encouraged smuggling, especially in auto parts, where the black market now accounts for an estimated 60 per cent of sales. 'The reduction of import barriers may widen the trade deficit in the near term, but as research has shown, import barriers are effectively a tax on exports. The way to manage the near-term pressure is to use the market-determined exchange rate as the first line of defence. Over time, the economy will adjust and things will fall into place,' Younus said.
India.com
6 hours ago
- Business
- India.com
Not Pakistan but this country leads in taking loan from IMF, it is..., India's position is...
(Image: REUTERS/Yuri Gripas) New Delhi: Whenever the discussion arises regarding the International Monetary Fund (IMF) and Pakistan, a distinct perception is formed. The perception is that Pakistan is the most economically dependent country on the IMF. Recently, during the conflict between India and Pakistan, the IMF had lent money to Pakistan again. However, it is undeniable that Pakistan has received a significant amount of loan from the IMF, but it is not the top borrower from this institution. According to the IMF, over 60% of the total loans given to 91 countries worldwide have gone to just five countries. At the top of this list is Argentina, with outstanding IMF credit amounting to 40.3 billion SDRs (Special Drawing Rights). Although Pakistan's name is included in the top 10 list, it is not in the first position. What is SDR? SDR is a special reserve asset of the IMF, the value of which is determined based on five major currencies (US Dollar, Euro, Chinese Renminbi, Japanese Yen, and British Pound). It is not a direct currency but serves as a basis for member countries to transact in actual currencies. Where does Pakistan stand? Argentina ranks first in borrowing from the IMF, followed by Ukraine, which has a debt of 10.7 billion SDR. Next are Egypt (8.2 billion), Pakistan (6.9 billion), and Ecuador (6.4 billion). Pakistan, often perceived as heavily dependent on IMF assistance, ranks fourth on this list. What is India's position? India has also borrowed from the IMF. However, India ranks much lower on this list. This means that India has taken much less loan from the IMF compared to Pakistan. India holds the 31st position on the IMF list, with a debt of 1.98 billion SDR.
Fibre2Fashion
17 hours ago
- Business
- Fibre2Fashion
ILO cuts projection in 2025 global employment growth from 1.7% to 1.5%
The International Labour Organisation (ILO) recently revised its global employment forecast for 2025, projecting the creation of 53 million jobs instead of 60 million estimated earlier. This translates into a reduction in global employment growth from 1.7 per cent to 1.5 per cent this year. ILO recently revised its global employment forecast for 2025, projecting the creation of 53 million jobs instead of 60 million estimated earlier, translating into a reduction in global employment growth from 1.7 per cent to 1.5 per cent. Nearly 84 million jobs across 71 countries tied to US consumer demand are now increasingly at risk of disruption due to elevated trade tensions, ILO said. The drop—the equivalent of around 7 million fewer additional jobs—reflects a downgraded global economic outlook, as gross domestic product (GDP) growth is expected at 2.8 per cent—down from a previous projection of 3.2 per cent. ILO's latest employment estimates, issued in its new World Employment and Social Outlook (WESO) Update, are based on economic growth projections from the recently released International Monetary Fund's (IMF) April 2025 World Economic Outlook. In addition, the ILO estimates that close to 84 million jobs across 71 countries are directly or indirectly tied to US consumer demand. These jobs—and the incomes they support—are now increasingly at risk of disruption due to elevated trade tensions, an ILO release said. The Asia-Pacific region is where most of these jobs—56 million—are concentrated. Canada and Mexico, however, have the highest share of jobs—17.1 per cent—that are exposed. 'We know that the global economy is growing at a slower pace than we had anticipated it would. Our report now tells us that if geopolitical tensions and trade disruptions continue, and if we do not address fundamental questions that are reshaping the world of work, then they will most certainly have negative ripple effects on labour markets worldwide,' said ILO director general Gilbert F Houngbo. The report also highlights troubling trends in income distribution. The labour income share—which is the proportion of GDP going to workers—fell globally from 53 per cent in 2014 to 52.4 per cent in 2024. Africa and the Americas saw the largest declines. Had this share remained unchanged, labour income globally would have been $1 trillion higher in 2024, or $290 more per worker in constant purchasing power terms. This erosion in the share of global income going to workers puts upward pressure on inequality and highlights a disconnect between economic growth and worker compensation, ILO noted. The report points to a shift in employment towards high-skilled jobs. Women are leading this trend. Between 2013 and 2023, the share of women employed in high-skilled occupations rose from 21.2 to 23.2 per cent, while the proportion of men in high-skilled occupations was around 18 per cent in 2023. Yet occupational segregation persists, with women underrepresented in sectors such as construction and overrepresented in clerical and caregiving roles. And while educational attainment continues to rise worldwide, the labour market remains characterised by significant educational mismatches, ILO said. The report also addresses the effects of new technologies on the world of work. It finds that nearly one in four workers may find their jobs transformed by generative artificial intelligence (AI). Fibre2Fashion News Desk (DS)
Express Tribune
21 hours ago
- Business
- Express Tribune
Budget talks with IMF underway
Ahead of the federal budget for fiscal year 2025-26, Pakistan is holding talks with the International Monetary Fund (IMF) for setting budget targets and potential measures to achieve them. Discussions will also focus on providing relief to the salaried class and industrial sector, among other key areas. The government is considering providing relief to the salaried class in income tax, which will be subject to IMF's approval. Among the proposals under review is a reduction in the income tax rate from 5 per cent to 2.5 per cent for individuals earning a monthly salary of Rs100,000.
Straits Times
a day ago
- Business
- Straits Times
The market will survive Trump, says economist who's seen it all
SINGAPORE – An economist who has had a ringside view of many major upheavals globally over the past four decades is not overly worried about US President Donald Trump's assault on trade. He feels the system will adjust to the shock and that Mr Trump may have to walk back some of his moves, though the United States itself may eventually face a recession. He also sees dependence on the US dollar declining. Dr Khor Hoe Ee has been a career economist with the International Monetary Fund (IMF), the Monetary Authority of Singapore (MAS), and in recent years, Amro – the Asean Plus Three Macroeconomic Research Office that he helped to set up. He has seen up close the Latin American debt crisis, the Asian financial flu of the late 1990s, the 2008 global financial crisis and more recent challenges such as the Covid-19 pandemic and the tariff war unleashed by the US. Join ST's Telegram channel and get the latest breaking news delivered to you.
