Pakistan, which faces growing economic difficulties, is preparing to tighten its belt. To unblock a billion dollar loan from the International Monetary Fund (IMF), the government is trying to push through a series of unpopular austerity measures. This loan is part of a $ 6 billion program, passed in 2019, whose funding had been blocked due to problems related to the reforms required by the international institution.
One year before the general election, these measures might cost Prime Minister Imran Khan dear. The bill in question, also called “minibudget” and presented to the National Assembly on December 30, provides for the end of tax exemptions on products ranging from mobile phones to certain foodstuffs, including articles. pharmaceuticals. The government, which hopes to collect 343 billion rupees (regarding 1.7 billion euros), has assured that the poorest will not suffer.
The Pakistani economy, plagued by rampant inflation, is mired in a difficult period. In December, the consumer price index stood at 12.3% year-on-year. The biggest increase in almost two years, according to the Pakistani statistics office. And food inflation has largely contributed to this increase. “The poor have been the most severely affected as more than half of their spending is spent on food,” says Khurram Hussain, a Pakistani analyst. According to a weekly indicator on essential goods, the prices of products such as potatoes, chicken, soap and gasoline were 20% higher last week compared to the same week a year ago.
The sharp fall of the Pakistani rupee increased the import bill by reducing the country’s purchasing power on international markets. “If oil is expensive in dollars all over the world, today it is even more expensive in rupees”, summarizes Uzair Younus, in charge of Pakistan at the South Asia Research Center of the Atlantic Council, an American think-tank. Ultimately, the government fears that the country’s foreign exchange reserves will dry up, further destabilizing the economy. In addition to its negotiations with the IMF, the country has therefore also turned to Saudi Arabia, which granted it a loan of $ 3 billion last month.
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