No business class flights, five-star hotels for Pakistan ministers
In light of Pakistan's ongoing financial crisis, the government has prohibited ministers from staying in five-star hotels or traveling in business class abroad. The moves follow the country's recent efforts to revive a $6.5 billion International Monetary Fund (IMF) bailout. Prime Minister Shehbaz Sharif after a cabinet meeting on Wednesday added that the budget in July would include more austerity measures.
Why does this story matter?
- In recent months, Pakistan's $350-billion economy has descended dangerously close to a debt default and it is also facing a dollar squeeze, putting its external stability to the test.
- Bloomberg Economics reported that supply disruptions caused by flooding, food shortages, and steps taken by the government to meet the IMF's preconditions for the rescue could push inflation above 30% for the first time.
Pakistan announces $764 million cost-cutting measures
Pakistan, the world's fifth most populous country, unveiled cost-cutting measures of nearly $764 million, to which ministers are also voluntarily contributing. On Wednesday, Sharif confirmed that a number of federal and state officials, besides high-ranking administrators, had volunteered to forego their benefits and salaries. As part of the cost-cut initiatives, he stated that the government has banned purchasing luxury items and cars until 2024.
This is need of the hour: Sharif
After a cabinet meeting in Islamabad, the Pakistan PM said: "This is need of the hour." "We have to show what the time demands from us and that's austerity, simplicity and sacrifice," Sharif was quoted as saying by the news outlet Bloomberg. Earlier this week, the Pakistan Parliament also voted to increase taxes on commodities.
Other key steps from Sharif-led government
The Sharif-led government had earlier increased energy prices and allowed the currency to weaken after the IMF called on the country to ditch subsidies and enable a market-determined exchange rate. Furthermore, the State Bank of Pakistan also increased the benchmark rate by almost 725 basis points at the start of 2022 while hinting at further monetary tightening.
Know about Pakistan's growing economic troubles
Pakistan is reportedly facing $542.5 million in coupon repayments this year, as per the information acquired by Bloomberg. The country, in total, has a debt of $8 billion in dollar bonds due by 2051, with the next payment installment of $1 billion due next year in April. Most of the country's external debt of approximately $100 billion is from concessional multilateral and bilateral sources.
Jaishankar speaks about Pakistan's economic crisis
Regarding Pakistan's economic crisis, External Affairs Minister S Jaishankar stated that no country can overcome such crisis "if its basic industry is terrorism." "The reality of this particular relationship (India-Pakistan) is that it has a fundamental issue which we cannot and we must not avoid. And that issue is that of terrorism because the moment you start doing this walk around that," he said.
Like economic issues, political issues must be fixed: Jaishankar
"And we mustn't be in denial of what are very fundamental problems in that relationship," Jaishankar was quoted as saying by Hindustan Times. "And just as a country has to fix its economic issues, a country has to fix its political issues, too," he added while speaking at the annual Asia Economic Dialogue in Pune on Thursday.