Islamabad, Pakistan – It is often tempting to declare every election as the most significant in a country’s history. But when Pakistan goes to polls on Thursday – in what some critics warn may be the most unfree election to date – it is no hyperbole to say the stakes are enormously high.
Former Prime Minister Imran Khan languishes in jail as the authorities crack down on his Pakistan Tehreek-e-Insaf (PTI) party, while previously imprisoned and exiled former Prime Minister Nawaz Sharif is back to contest the vote alongside an array of other candidates from the left to the right.
However, the focus of this election is not only on addressing nearly two years of political instability but, crucially, on establishing a new, steadfast government that can stabilise an economy in crisis for Pakistan’s 241 million people.
Some 40 percent of the population lives below the poverty line, inflation has skyrocketed to more than 30 percent, and according to a poll released this week, about 70 percent of Pakistanis believe economic conditions are worsening.
Last June, Pakistan faced the imminent threat of default, with foreign reserves plummeting to $4.4bn – barely covering a month’s worth of imports – while the currency shed more than 50 percent of its value against the United States dollar.
As the country found itself at a precarious juncture, then-Prime Minister Shehbaz Sharif managed to secure a crucial bailout package from the International Monetary Fund (IMF) – its 23rd fund programme since 1958 – just weeks before the government’s term expired.
The interim government, assuming power in August 2023, confronted the primary challenge of ensuring the continuity of the IMF programme, valued at $3bn.
Spanning nine months, this Standby Arrangement (SBA) IMF deal necessitated tough measures, including the elimination of subsidies on essential commodities, and allowing the rupee value to be determined by the open market.
With the current IMF programme concluding in March, just as the new government will take power, analysts emphasise that the winning party’s first order of business must be to re-enter negotiations with the global lender to maintain stability.
Simultaneously, Pakistan faces a looming debt payment crisis, with the central bank reporting $24bn of external debt obligations due by June 2024.
‘Anti-populist’ steps
The incoming government needs to negotiate with the IMF for a new programme, while also taking steps to reduce expenses and balance the budget deficit, Karachi-based economist Asad Sayeed emphasises.
“The government has to continue to take steps which are anti-populist in nature, subsidies on gas and petroleum cannot be resumed, exchange rate cannot be manipulated, and the focus should be to reduce expenses and balance the budget deficit,” Sayeed, who is a director at the research firm Collective for Social Science Research (CSSR), told Al Jazeera.
Sajid Amin Javed, a senior economist associated with the Sustainable Development Policy Institute in Islamabad (SDPI), urges the incoming government – regardless of its political affiliation – to prioritise economic decisions over political considerations and immediately engage with the IMF.
“The new government must keep politics separate from economics. They must avoid populism-driven decisions which were taken by some of its predecessors,” Javed told Al Jazeera.
The urgency conveyed by economists underscores the critical state of Pakistan’s $340bn economy amid a volatile political landscape.
The recent history of economic challenges includes Pakistan entering a $6bn, 39-month-long IMF bailout programme in 2019.
In early 2022, then-Prime Minister Khan’s decision to reduce fuel prices amid global spikes due to the Ukraine-Russia war violated IMF requirements, leading to challenges for the subsequent government.
Khan’s government was deposed in April 2022, replaced by a coalition government formed under the banner of the Pakistan Democratic Movement (PDM) – an alliance that also includes Sharif’s Pakistan Muslim League-Nawaz (PMLN) party.
In August 2022, the PDM government resumed the IMF programme but soon replaced the finance minister, Miftah Ismail, with a two-time former finance minister, Ishaq Dar.
However, economists have argued that Dar’s attempts to control the exchange rate has had adverse effects on the economy, similar to the PTI government’s decision to cut petrol prices.
Economist Sayeed said one of his concerns with the government of the PMLN – the frontrunners in the election – was if they bring back the same economic policies that were pushed by Dar, who is a senior member of the party.
“If the PMLN wins a simple majority and come in [to] power, they can end up taking steps which may derail the already delicately placed economy. You will again be teetering on the edge of a crisis and a potential default,” he said.
[Al Jazeera]
Tackling inflation
Additionally, the impact of inflation over the past year and a half is another pressing issue, which has led economists to underline the incoming government’s need to recalibrate its priorities.
Islamabad-based economist Javed warned that the wrong policies could jeopardise the delicately balanced economy, potentially leading to a crisis and default.
“Tackling inflation and protecting people from side effects of stabilisation policies must be top priority,” he said.
“The people, particularly the poor, have suffered a lot. Prolonged higher inflation and unemployment have pushed many below the poverty line. They need to be supported.”
Ali Hasanain, an associate professor of economics at Lahore University of Management Sciences, highlighted the enduring challenge of balance-of-payment crises throughout Pakistan’s history.
“There is no decade in which we have not stumbled through a balance-of-payment crisis and suffered ‘sudden stops’ in our economic management, accompanied by rapid, unplanned devaluations of the rupee and a painful spike in the costs of living,” he told Al Jazeera.
Highlighting the country’s plight, Hasanain said Pakistan is required to pay nearly $90bn in external debt obligations in the next three years.
These liabilities require the country to repay more every year than what it received in China Pakistan Economic Corridor (CPEC) investment in a decade.
“The government badly needs a plan to tackle this fact. But since this appears almost certainly infeasible, we need to negotiate with our lenders, either through a restructuring of our debt, or through offering equity in Pakistani assets,” he added.
Roadmap ahead
Fahd Ali, an assistant professor of economics from Lahore University of Management Sciences anticipated the incoming government struggling to align campaign promises with the reality of a sluggish economy.
“The party manifestos of leading parties promise lavish spending. This would be a tough promise to keep given that it is likely the new government will have to sign another three-year agreement with the IMF,” he told Al Jazeera.
Javed from SDPI underscored the need for any government to outline a plan for the first 100 days, with a focus on expanding the tax net. The tax-to-GDP ratio, currently at 10.4 percent, is among the lowest in the Asian region.
Economist Sayeed stressed the importance of policymakers helping the country move away from its longstanding “consumption-based growth model”.
The latest Pakistan Economic Survey in June 2023 (PDF) revealed that consumption expenditure accounted for almost 94 percent of the country’s GDP, while investment’s share remained more than 13 percent.
However, Sayeed contended that the most imminent threats faced by Pakistan are the challenges and effect of climate change and climate-induced disasters.
Recalling the floods of “biblical proportions” just two years ago, he emphasised the need for significant investment in climate mitigation and adaptation strategies.
“Climate-related disasters are taking place every year and we need significant investment for climate mitigation and adaptation strategies and policies,” he said.
We have to seek investment in this sector, but for that, the issue itself needs to be recognised and acknowledged first.”
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
