Pakistan professionals struggle with higher costs as economy teeters

Naureen Ahsan earns more than twice the average wage in Pakistan, but the school administrator says she has no choice but to homeschool her daughters and delay their London-board certified final exams because she can’t afford their education.

Like most people in the nation of 220 million, Ahsan and her husband, who owns a car servicing business, are struggling to cope with a surge in living costs triggered by the government’s devaluing the currency and removing subsidies to pave the way for the latest tranche of an International Monetary Fund (IMF) bailout needed to stave off economic collapse.

Pakistan is no stranger to economic crises — this is its fifth IMF bailout since 1997 — but economists say the latest measures, which include higher taxes and fuel costs, are hurting educated professionals. Many say they are cutting down on necessities to make ends meet.

“We don’t eat out any more,” Ahsan told Reuters. “We no longer buy meat, fish. I’ve cut down on tissue paper and detergent. We don't see friends, we don't give gifts.”

The government-mandated minimum wage is about 25,000 pak rupees, but with inflation at a record 31.5 per cent in February, its highest rate in nearly 50 years, many people who earn much more than that say their salaries do not last the month.

Abhi Salary, one of Pakistan’s biggest fintech firms, which allows its 200,000 or so subscribers to withdraw wages in advance, says transactions have increased by more than a fifth every month for the last three months. Most people spend two-thirds of the money on groceries as they rush to stock up before prices rise again, CEO Omair Ansari said.

“Educated professionals... find their purchasing power and savings eroded, and daily consumption either unaffordable or out of reach,”  said Abid Suleri, the Sustainable Development Policy Institute of Pakistan, an economic think tank. Ramadan is likely to add to price pressures in Pakistan. Analysts predict inflation to rise to at least 35 per cent a month in March and April. This year, for many people, Ramadan means more belt tightening.

The economic turmoil is driving some professionals out of the country. Khaliq, a doctor who also didn’t want to be give his full name because he was embarrassed by his financial situation, said he and his wife, who is also a doctor, work as much as they can to save up for exams to qualify them to work in Britain.

China deposits $2 bn in Pak central bank

Cash-strapped Pakistan has received a rollover of $2 billion in deposits for a period of one year from its ally China to help Islamabad get a much-required bailout from the IMF to stabilise its economy, a media report said on Friday.

The rollover, is not a loan but a financial deposit to be kept in Pak’s central bank for a  one year. Its forex reserves increased by $280 million to $4,598.7 million in the week ending March 17. 

 - Agencies

IMF awaiting deal on fuel pricing scheme

Loan agreement between Pakistan and the IMF will be signed once a proposed fuel pricing scheme, is settled, an IMF official said on Friday.

The latest issue is a plan, announced by PM Sharif, to charge affluent consumers more for fuel, with the money raised used to subsidise prices for the poor. The plan involves a difference of 100 rupees a litre between the prices paid by the rich and poor, the petroleum ministry said.

Reuters

Petroleum Minister Musadik Malik told Reuters on Friday that his ministry was working out details. It was not a subsidy but a relief programme, he said.

"People with larger cars will pay more than people with smaller cars. Smaller cars are more fuel efficient, so people will move towards more fuel-efficient cars," Malik said.

IMF NEEDS EXPLANATION

But the IMF's resident representative in Pakistan, Esther Perez Ruiz, said the government had not consulted the fund about the scheme.

Ruiz, in a message to Reuters, confirmed a media report that a staff-level agreement would be signed once a few remaining points, including the fuel scheme, were settled.

She has said that the IMF would ask the government for more details, including how it would be implemented and what protections would be put in place to prevent abuse.

The minister said the scheme wouldn't cost the government anything extra.

"We can explain all this to the IMF when they ask," he said, adding that the lender was in touch with the finance ministry not his.

The finance ministry did not immediately respond to a request for a comment.

With $4.6 billion in foreign exchange reserves held by Pakistan's central bank in the week ending Match 17, enough to cover only about four weeks of necessary imports, Pakistan is desperate for the IMF agreement to disperse a $1.1 billion tranche from a $6.5 billion bailout agreed in 2019.

Islamabad has implemented several measures, including devaluing the rupee, lifting subsidies and raising energy prices, as preconditions for the agreement, which the finance minister said this month was "very close".

- Reuters