Over the past few months, Pakistan has gradually started to witness the positive effects of economic improvements, which is a promising development for the business class and the general public. However, it is somewhat concerning that if the past governments had initiated these measures during their terms, Pakistan might not have faced the economic challenges that it did in recent months.
When we assess the ongoing economic crisis in Pakistan, one fundamental reason becomes evident: the depreciation of the Pakistani Rupee against the US Dollar. The daily increase in the value of the US Dollar had made it increasingly difficult to import essential food items, life-saving medicines, crucial raw materials for industries, and chemicals from abroad. Nonetheless, due to strict actions against illegal currency trading and smuggling by security agencies, the value of the Pakistani Rupee has significantly improved, and in recent weeks, the exchange rate has decreased by almost fifty Rupees compared to the Dollar. This is why, in September, the Pakistani Rupee was declared one of the world’s best-performing currencies.
According to a recent report from the Ministry of Finance, the stable exchange rate is attributed to administrative actions against illegal foreign currency traders and hoarders. The positive signs from international organizations like the World Bank, Asian Development Bank, and friendly countries, providing funds, have significantly contributed to stabilizing foreign reserves and promoting industrial development. It’s worth noting that after the IMF provided a $3 billion bailout package, controlling the open market rate became essential, as per the IMF agreement, the spread between the interbank and open market rates shouldn’t exceed 1.25%. In this regard, the intervention of the military chief and crackdown by security agencies played a crucial role in reducing the artificial demand for the Dollar.
Another piece of good news regarding economic improvement is that the Federal Board of Revenue (FBR) has exceeded its revenue collection target for the first three months of the current fiscal year. According to FBR’s released figures, the organization collected Rs. 2.041 trillion in taxes during the last three months compared to the targeted Rs. 1.978 trillion. Additionally, during this period, Rs. 37 billion in refunds were issued, which is more than double the Rs. 18 billion refunds issued in September 2022. This means that not only is the shortfall in revenue for the industry expected to reduce, but common citizens have also found relief from the additional taxes imposed to meet the revenue targets.
Although FBR has not disclosed the means of extra tax collection, it’s reasonable to assume that this increase is due to the ongoing efforts against the undocumented economy. This is also crucial because in September 2023, tax collection was at its highest in several months, with Rs. 254 billion, compared to August 2023, when Rs. 299 billion in taxes were collected.
Another positive development in the context of economic improvement is that the government has reached an agreement regarding the restructuring and timing of Pakistan International Airlines (PIA), which has been suffering from financial difficulties and mismanagement. PIA is one of those national institutions that have been consistently incurring losses, and previous attempts to address this issue were unsuccessful due to employee protests and the lack of consensus among political parties. As a result, the losses continued to mount.
However, with the revival of PIA, international travelers can expect to receive services that meet international standards, and the parallel of India’s national airline, Air India, comes to mind. In January 2022, the Indian government sold Air India, along with its subsidiary Air India Express, to the Tata Group. Within a year, this airline ordered 470 new planes, setting a new record in the airline industry. In my opinion, this is a great example of how restructuring can lead to positive results in a short time.
