Talking poverty

There has been little formal conversation about the impact of the PTI government's decision to slowdown economic growth and increase the prices of essential goods and services. One would expect poverty levels to have risen in the last ten months based on the socially disastrous policies – but those in power remain mum on these numbers. In a conversation with this newspaper, senior economist Dr Hafeez Pasha has shed some light on these numbers. Dr Pasha estimates that around four million people have gone below the poverty line within the last year, a number that might increase to eight million in the next two fiscal years. Around 800,000 to one million people have been added to the list of the unemployed. If the numbers are correct, then the government has induced an economic slowdown which is having devastating consequences for real social welfare. While the government has made a big hoopla about proposing a poverty reduction programme, the reality is far more grim. The numbers make sense. How could poverty not increase when wages are stagnant and prices go up? Former finance minister Asad Umar did little to hide that the public would be swallowing a bitter pill in the first few years under the PTI – but what the government continued to deny is that the worst impact will be felt by the poorest sections of Pakistani society.Low growth and high inflation are both responsible for this, and this is only set to get worse once Pakistan enters the IMF programme. The rupee will depreciate more while the burden of indirect taxes will be increased. This means that inflation could hit double-digits in the next fiscal year. With the budget deficit set to hit seven percent this year, despite major cuts in development spending, improvement in the fiscal situation is likely to be slow. Moreover, Dr Pasha estimates that Pakistan needs to pay back $40 billion in loans in the next two years – which is separate from the additional lending that the current government has undertaken.Pakistan will need to hope that some of those loans can roll-over unless it is to face another crisis like situation very soon. Another major concern is the IMF demand to seek up to Rs700 billion in additional revenue next year. If the government moves ahead with it, the consequences are likely to be dire. With the economy at a standstill, it would amount to the government extracting more rent out to keep it afloat. As a strategy, this could not only push more people into poverty, but also create capital flight. It is clear that the ongoing approach to the economy is sending more people into poverty. Can the current government buck the trend? It will need to step out of its hubris to do so.

from The News International - Editorial http://bit.ly/2Wu1kNT