The new prime minister will lead a short-lived government as new elections are scheduled for August 2023. Some in Pakistan are calling for even earlier polls. Time constraints will therefore not allow the substantial and serious reforms that are necessary to ensure the national and foreign institution.
Financial analysts say the Imran government was overthrown by inflation. Over the past two years, due among other things to the economic impact of the coronavirus, Pakistanis have seen the price of essential goods increase by more than 15%, an all-time high.
This led the State Bank of Pakistan to raise its key rate last week by 250 basis points to 12.25%, the biggest increase in years. The Central Bank said the measure was necessary due to a “deteriorating” inflation outlook and global tension, particularly the Russian war in Ukraine and of course the standoff between Imran Khan and the opposition. Political tension in the country is pushing inflation higher, the bank said.
Its statement said last week’s squabbles between Imran Khan and his opponents “contributed to a 5% depreciation of the rupee”. He also pointed to the pressure of a sharp decline in foreign exchange reserves. Reserves held by the central bank fell $728 million to $11.3 billion on April 1 from $16.2 billion on March 4, the bank said.
Pakistan therefore, as the Central Bank has made clear, urgently needs a break from the political tussle. The country cannot afford more of this tension. There is a kind of clarity today, which will obviously help assure international institutions such as lenders and credit agencies of the country’s ability to meet its financial commitments. But in the long term, Pakistan needs a viable, substantial and realistic reform program to put the economy back on track and stem the spiral of inflation.
The new government, with an experienced administrator at its helm, must ensure that this is a national priority. He may not have much time to achieve such a goal. But it can start the process, which begins with political stability.