- Expert warns of decline in remittances due to use of informal channels.
- Highlights potential difficulties in collecting taxes for the government.
- One must observe how Pakistani expatriates respond to Khan’s calling: banker.
KARACHI: The Pakistan Tehreek-e-Insaf (PTI) has marched on Islamabad several times in recent months, with the latest protest taking place in November last month, during which the government launched a midnight crackdown against party members to disperse them.
However, in the days leading up to the protest, the government had adopted strict measures in Punjab and more so in the federal capital, sealing off roads to deter the march of protesters.
The roadblocks, coupled with restricted internet and mobile services, have hampered residents’ daily lives and had an economic impact on the population.
Lamenting the economic consequences, Finance Minister Muhammad Aurangzeb had said at the time that the country was suffering losses amounting to Rs190 billion on a daily basis due to road closures and lockdowns triggered by calls for protest.
However, despite strong criticism from various segments of society over the ill-effects of such protests, Khyber Pakhtunkhwa (KP) Chief Minister Ali Amin Gandapur on Saturday threatened to launch further “attacks” on the ruling government .
“We will continue to launch attacks like the battle of Panipat. We will win if the demands are not met,” he said while speaking to media in Peshawar.
“We have launched (only) five attacks and will continue to launch the rest,” he added.
However, this is not the only action mooted by the former ruling party as its founder Imran Khan, imprisoned for over a year now, announced that he would launch a nationwide civil disobedience campaign starting December 14 if the party’s demands were met. not encountered.
As part of the move, overseas Pakistanis will be encouraged to reduce their remittances and participate in a boycott campaign.
Deeper economic crisis
Regarding the PTI announcement, experts expressed concerns about the economic consequences of such a campaign, News reported Sunday.
“If the PTI launches a civil disobedience movement, it could have serious consequences on Pakistan’s economy. Remittances, which bring in more than $30 billion a year, could decline if people are encouraged to use informal channels like hawala instead of formal banking systems,” said Saad Hanif, head of research at Ismail Iqbal Securities.
“Political instability could spook investors, further weaken the rupee and drive up inflation, making life more difficult for ordinary citizens. Overall, it could disrupt government plans and push the economy deeper into the crisis,” he added.
Hanif also said that “(civil disobedience) would reduce the country’s foreign exchange reserves. The government may also struggle to collect taxes and utility bills, thus worsening its financial problems and delaying important projects.”
Meanwhile, Head of Research at AKD Securities Limited, Awais Ashraf, believes that possible civil disobedience will not have a significant impact on remittance flows, as people send this money to support their families and some flows are self-employed income.
Remittances to Pakistan increased to $11.8 billion between July and October FY25, up 34.7% from the same period last year, providing support crucial to the external account.
The government and central bank expect remittances to reach historic levels of $35 billion in FY25, averaging $2.9 billion per month so far. These large inflows will bolster reserves, providing a much-needed boost to the economy.
A senior banker said we need to observe how Pakistani expatriates react to the planned call.
In reality, Pakistan regularly receives large remittances from its migrants working abroad, most of whom belong to the lower and middle classes and generally hold manual jobs in Gulf countries, particularly Saudi Arabia. and the United Arab Emirates, he explained.
However, expatriates who may have acquired citizenship in their host country often send remittances home on occasions such as Eid holidays, for Hajj, for charity and to make investments in the country.
Khan’s latest announcement comes at a time when the country’s struggling economy is on the mend, largely thanks to the International Monetary Fund (IMF) bailout. As a result, inflation declined, falling to 4.9% in November – weekly inflation fell further to 3.57%.
The current account balance turned into a surplus of $218 million in the first four months of fiscal 2025, compared to a deficit of $1.528 billion in the same period last year.
As of November, foreign exchange reserves held by the State Bank of Pakistan (SBP) stood at $12 billion, which is enough to cover more than two months of imports.
Interest rates have also fallen, falling 700 basis points to 15% since June. Additionally, Pakistan’s benchmark stock index performed well, surpassing 100,000 points.
If the economy suffers from political unrest, the IT sector, which is already suffering a slowdown, will likely face more difficulties.
Furthermore, constant internet disruptions and slow speed are detrimental to the national economy in general and the IT sector in particular, which will further affect economic activities and damage the country’s reputation if the situation persists, Saad said Shah, IT manager. exporter.
When it comes to the IT sector, various IT companies are facing difficulties in completing their projects on time despite their multiple efforts of working overtime due to the current internet situation.
Large IT companies with annual contracts with local and foreign clients can survive by managing their work from offshore offices, but mid-sized and small players, including freelancers, have no choice but to lose revenue. projects and clients, Shah added.