DAWN Editorials - 8th January 2025

[faheemustad]

Closed doors


SOMETHING is afoot in Islamabad, but few seem willing to venture a guess about what is really going on. It is curious that both the PTI and the government seem much more elastic than at any point since the former’s banishment from the corridors of power.

Officially, the two are engaged in negotiations; however, there has been little by way of tangible progress in their talks, with matters still stuck on what the PTI’s formal demands are and the PTI’s insistence on unrestricted access to its incarcerated founder-leader. Meanwhile, there has been a constant cycle of speculation and denial about back-channel talks between the PTI and the military establishment. Whatever the truth of those may be, it is widely understood that no talks can progress unless there is some sort of understanding between the two, especially given the latter’s expanded involvement in running the affairs of the state.

The distrust between the PTI and the incumbent regime has grown into a chasm over the last few years. Bridging it is, therefore, no simple task. The mere fact that official negotiations were initiated was itself a major accomplishment, given the circumstances. That they have continued for more than two weeks, despite apprehensions on both sides, piques one’s interest. After all, one of the negotiating parties had, till recently, dismissed the other as having no real authority at all; the other still paints the former as a ‘terrorist’ entity involved in ‘anti-state activities’. It has been said that shared concerns over terrorism and the economy have, at least temporarily, helped overcome the mutual contempt both hold for each other. It is unfortunate, however, that whatever rules of engagement are being agreed upon are being decided in secret, without the public given much of a hint about what, precisely, is under discussion.

It would have been much better had the ongoing dialogue been conducted in the public eye. Perhaps a bit of secrecy is still needed given how polarised the country is at the moment and because none of the parties may be comfortable making necessary concessions that may lower their public standing in any way. Still, the public deserves to know what terms are being negotiated so that there is a broader consensus on how matters will proceed thereafter.

The nation’s fate has been decided through secret deals for too long, with the result that the citizenry has become increasingly alienated from the state. It is hoped, therefore, that the final round of dialogue, at least, will be conducted in the public eye so that there is a wider debate on each side’s positions. For there to be closure, all stakeholders, including the citizenry, must be brought on the same page. Once there is consensus, the nation will move forward.

Published in Dawn, January 8th, 2025


Debt burden


THE federal government’s total debt stock soared by above 11pc year-over-year to Rs70.4tr at the end of November, new State Bank data shows. But that does not come as a major surprise; debt growth is primarily driven by fresh borrowings for budgetary support. However, the pace of debt accumulation during the current fiscal year has been slower than expected as the stock rose by just 2pc in five months. It is the decreasing burden of interest payments on the back of falling interest rates, and a drastic improvement in the primary balance, which determines the size of the loans that the government must secure to cover the income gap. The SBP slashed its policy rate by 900 bps to 13pc since June as headline monthly inflation plunged to a single digit. Likewise, the primary balance has improved to 2.4pc of GDP from 0.4pc in the last fiscal year. The record non-tax revenue contributed by the SBP from its profits has also helped the government throw up a fiscal surplus of 1.4pc of GDP.

While the government has accumulated fresh debt in the first five months of the year, the SBP data shows that federal and provincial borrowings from the scheduled banks for budgetary support have experienced a significant decline with debt retirement of slightly over Rs2tr against borrowings of Rs2.89tr in the same period in FY24. The federal government repaid an amount of Rs1.575tr to the banks compared to Rs3.4bn of borrowings a year ago. The future debt trajectory largely depends on the Federal Board of Revenue’s performance and a decrease in wasteful public expenditure through the restructuring and sale of state-owned enterprises, besides a drastic reduction in the size of the oversized federal government. The rise in federal debt highlights persistent fiscal challenges as Pakistan navigates one of its severest economic crises, marked by heightened borrowings, to address budgetary deficits as well as balance-of-payments troubles. The situation underscores the need for structural reforms to ensure sustainable fiscal management and to reduce reliance on short-term debt. This is precisely what the SBP had emphasised in its latest monetary policy statement released last month when it called for continued fiscal consolidation to support macroeconomic stability and reiterated the need for fiscal reforms, focusing on broadening the tax base and curtailing the SOEs’ losses.

Published in Dawn, January 8th, 2025

GB power crisis


MASS protests are not a novelty in Pakistan, and when the state refuses to listen through the available channels — which it often does — people take to the streets and disrupt life to get their message across. Protests have been continuing in Gilgit-Baltistan since last week over 22-hour power outages in the region. Demonstrators, braving the mountainous area’s harsh winter weather, have blocked the Karakoram Highway in Hunza, affecting trade with China. Similar protests have also been held in other parts of GB. Civil society groups, political parties, and traders have all backed the demonstrations. Locals say that the lengthy blackouts, and resultant internet breakdowns, have affected students as well as online businesses and trade activities. Such mass protests were held in January 2024 too; at that time, along with regular electricity supply, GB’s people were calling for a withdrawal of an increase in the subsidised wheat price, among other demands. A GB government spokesman says “90pc” of the protesters’ demands have been met, while promising that new power projects would be completed by “next year”.

The centre, which dominates GB’s governance, as well as the regional administration, must ask why local people take to the streets so often. Clearly, the state machinery is failing to adequately respond to the population’s needs. Where power is concerned, it is indeed a problem to ensure regular electricity supply due to the region’s rugged terrain and limited infrastructure. Yet there are solutions that have been suggested for mountain communities, for example wind and solar energy, which can ensure relatively regular power supply. Economic opportunities in the region are already limited, and when there is no power for most of the day, the impact on life is debilitating. CNN has recently listed GB as amongst the top 25 places to visit in 2025. Yet to fully tap the region’s potential, pressing local issues need to be addressed forthwith.

Published in Dawn, January 8th, 2025