Does Pakistan’s economic crisis need political stability? Ahmed Mughal

by Tauqeer Abbas

After further increase in value of dollar against rupee on Thursday, when the stock market also witnessed a sharp bearish trend, on one hand political uncertainty was blamed, on the other hand the question was raised on social media. Will the end of political instability be able to stop the pace of economic decline?

It should be noted that the depreciation of the rupee in Pakistan is seen as an indicator of the economy, which affects every sector of the economy in one way or another.

After a gradual depreciation of the rupee over the past few years, the rupee remained relatively stable against the dollar in the last few weeks of the PDM government’s agreement with the IMF. There has been a considerable increase.

In such a situation, journalist Talat Hussain drew attention to the change in the dollar rate and the decline in the stock market on Thursday. Najam Ali, a user on the social media website X, wrote in response that ‘you know the reason, the future Lack of certainty and investor confidence.’

Najam Ali wrote that ‘Many people think that the governance system is exploding.’

On social media, while Tehreek-e-Insaf supporters continued to explain the recent economic downturn as the reason for PDM’s performance and non-election, there was also a section that was of the opinion that immediate resolution of these issues was more important than blaming anyone at that time. There is a solution.

This class was represented by the user Rehan Shafiq in these words, “The stock market has crashed, it should be blamed on the previous government or on Imran Khan or on Ayub Khan.” For the sake of God, protect us from whoever is to be put on it.

Apart from this debate, the important question is whether political stability is necessary to improve various economic conditions, including the continuation of depreciation of the rupee.

To find out the answer to this question, BBC Urdu spoke to a few analysts, but before that, what was the difference between the stock market and the dollar rate during the tenure of the caretaker government and was it the responsibility of the caretaker government? Is imposed on?

What was the situation of the stock market and the dollar in the caretaker government?

In the currency market, the interbank dollar closed at Rs 288.49 on the last business day of the PDM government, the highest since the formation of the caretaker government, and closed at Rs 305.54 on Thursday. happened

During the tenure of the caretaker government, the interbank rate of the dollar has increased to Rs 17.05.

Similarly, on the last trading day of the PDM regime in the open market, the price of one dollar closed at Rs 297.50, recording an increase in the watchdog setup and on Thursday, its price went up to Rs 325. . Thus, its price has recorded an increase of more than 17 rupees so far.

The Pakistan Stock Market closed at 48424 points on the last trading day before the departure of the PDM government.

On August 2023, Anwar-ul-Haq Kakar was sworn in as the caretaker prime minister, then on August 15, the first business day saw a slight boom in the market, but after that, the stock market index began to show a downward trend and at the end of August The stock market witnessed a very negative trend during the week.

The stock market index fell by 200 points on the first business day, and on Tuesday, the stock market index recorded a decline of 708 points.

On Wednesday the index recorded a further decline and on Thursday the market continued to bear a sharp bearish trend and the market index recorded a decline of 1242 points at the close of business after which the index came down to the level of 45002 points.

What is the reason for the increase in the value of the dollar and the decline in the stock market during the caretaker regime?

After the establishment of the caretaker government in the country, the value of the dollar increased a lot on the one hand and on the other hand the stock market was suffering from severe depression.

Regarding the decline in these two economic indicators under the caretaker government, economic affairs analyst Sana Tawfiq says that the reason for the decline in both economic indicators is the increase in uncertainty in the political and economic situation of the country.

He said, “First of all, it should be noted that the delay in giving the election date after the caretaker set-up has increased political uncertainty and has created a very negative trend in the market as investors There are fears that the biggest negative impact of political uncertainty will be on the economic situation.

He said, ‘Similarly, the reaction that came after the increase in electricity rates and the IMF program was held responsible for it, the fear also arose that in such a situation, Pakistan’s IMF program would go sour. Do not fall because after the strong response to the increase in electricity rates, will the gas tariffs also increase under the IMF conditions or not?

He said that the caretaker government has not given a clear stand on this. Sana said that in the current situation, it is seen that the economic conditions may worsen, which will have a negative impact on the stock market and the dollar.

In response to a question, he said that although the next installment is to be released by the IMF in November, it is still two months away and the question is whether the caretaker government will be able to take more difficult decisions. Under the IMF conditions could be met as the strong reaction following the hike in power rates has made it difficult to implement further conditions.’

Is political stability necessary for economic stability?

Analyst Farah Zia said while talking to the BBC, “It cannot be said that the economic issues worsened only after the caretaker government came in, because if you look at the continuity of the economic conditions, these things happened during the government of Imran Khan.” It had already started that the economy was not going well and this problem also played a role in the departure of his government.

However, Farah Zia said that “the decisions taken by the last government, PDM, during the last month and a half, we are now seeing their effects, the caretaker government is facing them.”

It seems from the statement of the caretaker finance minister that he is suffering from the decisions of the previous government.

But is the position of Tehreek-e-Insaf correct that the reason for the economic crisis is the lack of elections?

Farah Zia said that it would be wrong to say that the reason for this economic crisis is the postponement of the election.

But isn’t the economic situation linked to political stability and a certain degree of stability is possible with the clear date of the election coming out?

In response to this question, Farah Zia says, “If we believe that stability will come from elections, then political stability will definitely come from holding elections on time.”

“But the way our politics is going, I don’t think that elections will solve any issue because cases are being made against a political party, their people are in jails, so they are campaigning like this.” Will not be able to. On the other hand, a party is not talking about elections and it is not in the mood of election campaign.

Farah Zia’s position was that there is a need for a dialogue between the institutions to sit down and discuss the basics of how to run Pakistan, how to run the economy, how to run politics, what the role of the establishment should be. What will be the role of political parties?

“If this dialogue does not take place, elections must be held in the current situation according to the constitution, and in my opinion, some form of stability will come from it.”

He said that ‘I think the political parties should be united because the establishment will probably not play a role in any kind of charter of economy because they use the political parties against each other.’

Farah Zia was of the opinion that ‘I think everyone has had so much experience that it is a circle that keeps on going. It may be a backdoor, but everyone should have this conversation and the political parties should later include the judiciary and the establishment.

But it must be done before the election, otherwise the election will not solve any issue because no single political party can run the country alone.

Shafaqna Pakistan

Note: Shafaqna do not endorse the views expressed in the article 

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