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WB: A wake-up call

Nero fiddled while Rome burned. Nero was rightly blamed for ignoring a serious matter, and neglecting his people while they suffered. Events unfolding in Pakistan in quick succession amidst indifference of stakeholders appear to represent a similar situation.

The World Bank, in its report issued last Tuesday, divulged that “various economic shocks have pushed nearly four million Pakistanis into poverty this fiscal year alone and has warned Pakistan about serious dangers to its economic and debt viability while projecting almost a flat economic growth, with an average inflation rate of 29.5 percent for the current fiscal year”.

The report further states that the future also remains “highly uncertain” with only 0.4 percent economic growth projected this year and 2 percent for the next fiscal year. The average inflation rate for FY2023 is projected at 29.5 percent and 18.5 percent for next year, indicating that the annual inflation rate will be much higher. World Bank forecast of almost no growth this year and less than growth in coming years is a red flag to the economic and social stability of the country. The country needs at least 6 percent growth to stay afloat. There are no signs nor is there a mechanism in place to make this happen.

In the absence of public transfers that cover income losses or mitigate the impact of higher prices, “poverty is projected to increase to 37.2 percent in FY23, pushing an additional 3.9 million people into poverty as compared to last fiscal year,” according to the World Bank.

Poverty by WB standards is measured at the lower middle-income poverty line, $3.65 per day based on 2017 Purchasing Power Parity (PPP) per capita. The depth and severity of poverty have also increased, reflecting the overlapping impacts of multiple shocks and lack of savings with households to mitigate short-term impact.

The report says that the inflation outlook suggested that real interest rates will remain in the negative territory, possibly warranting further tightening of monetary policy in the near-term.

The warning of the World Bank is already turning into a big reality and is unfolding on ground for all to see. Visuals in the media of mobs struggling to get free wheat flour at distribution outlets set up for the purpose say it all about the state of the country’s poor. In just one instance at least 11 people, including women and children, were killed and several others injured in a “stampede” at a free ration distribution point in Pakistan’s port city of Karachi, a city of teeming millions. Many more were killed and are being killed in their quest for free wheat flour or rations in other parts of the country as well.

“We all knew that poverty exists and persists, but the sheer scale of misery which has surfaced with this flour distribution scheme is alarming,” Farooq Tariq, a leader of the Pakistan Workers Party, is reported to have stated. “Punjab says it has distributed close to three million bags so far, but the queues are getting longer by the day. Where are these people coming from? People like us have been warning about destitution, but the sheer scale is enormous and can set our entire society on fire if ignored,” he warns.

Amidst all this misery, there is news of wheat shortage in the country, which is indeed quite baffling in view of the fact that Pakistan is a major wheat growing region and at times exported wheat. There is media coverage of massive wheat hoarding and misappropriation in free wheat flour distribution. Apart from inflation affecting the poor, the greed of the elite is adding to their plight.

On account of massive layoffs due to business closures and on account of the meltdown of government systems and processes that keep businesses going, there is massive unemployment in the country. This compounded with massive inflation has resulted in an increase in street crimes at a scale unmanageable by state security apparatus.

The densely populated city of Karachi tops in street crimes, including armed robberies. Same holds true for the whole of Pakistan. Even Islamabad is not spared. The capital of Pakistan has witnessed a steep rise in various street crimes in recent weeks. It is a situation that has to be viewed in a very broad context. It possibly presents a threat to the sovereignty of the state. Needless to say, the shenanigans of the political elite for power capture are egoistic and self-serving. It is again a game of elite at the expense of the have-nots and a deplorable exposition of elite capture – an act unforgivable by the people of the state. In the short history of Pakistan, this game has been played many a time before and like before may pass away leaving a trail of a royal mess in its wake to be cleared up by the citizens of the state. But what may not pass away this time is the massive social disconnect or discontent!

Farhat Ali, "WB: A wake-up call," Business recorder. 2023-04-08.
Keywords: Economics , Economic growth , Higher prices , Monetary policy , World Bank , Farooq Tariq , Pakistan , PPP , WB

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