Shehbaz Sharif faces subsidy on Khan-era fuel energy, inflation and polarized Pakistan

Shehbaz Sharif faces subsidy on Khan-era fuel energy, inflation and polarized Pakistan – Mail Bonus

Pakistan’s new government, led by Prime Minister Shehbaz Sharif, faces major challenges – economic, political and social.

Dealing with the economy is possibly the biggest challenge, in addition to the fact that the new government has a very short term – a maximum until August 2023 until the next general election, or a shorter term if elected earlier. This would be insufficient to make the drastic improvements needed before going to the people to apply for a new mandate.

Take the example of oil concentration. In February, the outgoing government of Imran Khan announced a subsidy of 21 rupees per liter for petrol and 51.54 rupees for diesel, which cost the Treasury 260 billion by June 2022. There was also a 5 rupees reduction per unit of electricity. These subsidies led to the suspension of the $ 6 billion IMF Extended Fund Facility (EFF) program. The challenge for Shehbaz Sharif would be to switch between ending the fuel economy – which would be very unpopular and provoking a strong public reaction – and continuing with it, which would be financially disastrous.

The current account deficit (CAD) for the first nine months (July-March) of the current financial year has increased to over 13 billion dollars. Analysts expect it to reach $ 16-18 billion in the current fiscal year ending June 2022. Such a large CAD would lead to a rapid devaluation, make imports more expensive and lead to rising inflation, which had already risen to 13% in April.

To avoid depletion of foreign exchange reserves, Pakistan would need an inflow of $ 9-12 billion in the current fiscal year. This must take the form of transfers and new loans from China, Saudi Arabia, commercial loans from banking conglomerates and the revival of the IMF.

The government has begun talks with the International Monetary Fund on this issue. It has also called for a nine-month extension of the EFF – from September 2022 to June 2023 – and an increase of $ 2 billion to $ 8 billion. There are indications that the plan can be revived, provided that fuel subsidies are reversed.

A measure that people would judge a new government by would be how it controls inflation, whether fuel prices rise and how it responds to severe stress at the height of a very hot summer due to Pakistan’s inability to buy enough fuel. to operate their power plants.

With elections after a year, the political cost of unpopular actions would be enormous for the government.

Among the main political challenges would be to control the consequences of Khan’s large-scale factions, his threat of conflict politics and a long march at the end of May aimed at pushing for early elections.

Khan, who is dissatisfied with his democratic expulsion, must take advantage of the general unrest if fuel prices rise. He has convinced himself that public support would be reflected in votes based on his account, false as the military has reported, of a US conspiracy that freed him from his seat.

What is worrying about Khan is that the government is preparing to establish its own brand of responsibility against him, just as he had launched a brutal prosecution when they were in opposition.

The government would hope that Khan will eventually run out as it is difficult to maintain the momentum of the parties and in any case it can not force elections. Khan prefers violence to violence, forcing the military to intervene, rather than allowing Sharif to remain in power.

As if all this were not enough, the government would have to face the challenge of tackling the highly polarized and fragmented Pakistan, even more than it has usually been. This was a lasting legacy of the conflict politics and cruel rhetoric that Khan gave up over the past four years and branded those who opposed him a traitor. An example was a Dawn story about a seven-year-old girl who told her father that followers of Pakistan Tehreek-iInsaf (PTI) and Pakistan Muslim League-Nawaz (PML-N) had begun to sit separately.

The author is a member of the National Security Advisory Committee. Opinions expressed are his own.

Mail Bonus – #Shehbaz #Sharif #faces #subsidy #Khanera #fuel #energy #inflation #polarized #Pakistan

Leave a Comment

Your email address will not be published.