Economic Challenges Facing Imran Khan in Pakistan

Imran Khan, a cricketer turned politician has won the 2018 general election in Pakistan. This win is being touted as historic for many reasons. Pakistani politics is known to be controlled by a handful of influential families.

Religious extremists also control Pakistani politics to some extent. Imran Khan does not belong to either of these cadres. Yet, he has been able to obtain a stunning mandate from the population of Pakistan. This is the reason why his election is being considered a historic turning point.

Opponents have been alleging that the elections were rigged. Some of them have also been alleging that Imran Khan has the support of the extremely powerful Pakistani Army. However, proponents of Imran Khan believe that he has been elected because his election campaign focused more on economic issues. The common belief is that the people of Pakistan have abandoned religious extremism in favor of economic issues.

In this article, we will have a closer look at some of the economic issues which are facing Pakistan.

IMF Currency Crisis: The International Monetary Fund has bailed out Pakistan 8 times since the 1980’s. However, it seems like Pakistan will need another bailout. It is currently in a precarious position.

Pakistan has high import dependence because of its need for crude oil. However, they do not generate enough exports to be able to pay the bill. This is the reason why the current account in Pakistan is under constant pressure. The foreign exchange available with the government has plunged to as low as $9 billion!

Pakistan’s central bank has devalued its currency several times in order to temporarily fix this problem. However, further devaluation seems unlikely, and hence IMF bailout seems to be the only feasible option. Imran Khan will have to work out the details of this high stakes high-pressure deal with the IMF.

Populist Agenda: The problem with the IMF deal is that the IMF is known for imposing its austerity agenda on countries which are seeking a bailout. Hence, if Pakistan wants an IMF bailout, it would have to implement austerity measures too.

The problem is that Imran Khan has already made populist promises in his run-up to the general election. He has promised building schools and hospitals in rural areas. This would require Pakistan to increase its spending and would therefore not fare well with the IMF.

Another possible way would be to trim Pakistan’s huge defense budget in order to create funds for Imran’s populist agenda. Given the clout of the Pakistani army, that would be next to impossible. Imran Khan, therefore, faces the challenge of reconciling his populist agenda with IMF’s demands.

Increasing Tax Collections: Pakistan is known to be a country where corruption is rampant. In fact, Nawaz Sharif, the former Prime Minister of Pakistan has been imprisoned for siphoning of billions of dollars in taxpayer money.

Pakistan has a culture of tax evasion. The people do not trust the government. They do not believe that the money will be used for the benefit of their countrymen. Instead, they believe that the money will be used to fill the coffers of corrupt politicians. This is the reason why tax evasion is the norm.

Less than 1% of the population of Pakistan pays taxes! Imran Khan faces a challenge. He needs to change this mindset and increase the number of taxpayers. If the culture of embezzlement and tax evasion is stopped, Pakistan may not need IMF loans to survive.

Privatization: The state-run entities in Pakistan are making huge losses. This is because these entities are highly inefficient and ill-managed businesses. Pakistan International Airlines is a prime example of state-sponsored mismanagement.

Earlier Pakistani leaders have tried to privatize these companies. However, since these companies are already making huge losses and there are some issues related to labor unions as well. This is the reason that these sales have not materialized till now.

Imran Khan’s priority will be to sell off these companies. These sales will help generate more money for the exchequer which is of vital importance for cash-strapped Pakistan. If some of these enterprises are sold off at fair value, Pakistan may not have to go to the IMF to ask for more loans.

The China Threat: Imran Khan has mentioned China as Pakistan’s greatest ally in his victory speech. This is because of the China Pakistan Economic Corridor. This is the biggest infrastructure project that Pakistan is engaged in right now.

Pakistan’s hopes of attracting any kind of foreign investment are also pinned on this project. However, many analysts in Pakistan are concerned about the mounting debt burden that Pakistan faces because of its investments in the CPEC.

Many analysts have alleged that Pakistan is falling into an external debt trap. Hence, Imran Khan would have to look into the financial details of the CPEC and ensure that things are not out of control. China has a bad record of loan sharking poor nations. It would be Imran Khan’s duty to ensure that Pakistan is not the next victim.

In conclusion, there are several economic challenges which Pakistan faces. The election victory is only the beginning. The biggest match of Imran Khan’s life may just be about to begin.

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