Consider two things carefully. First, the load for taxpayers who meet each year every year, with a marked acceleration in the previous three years. Secondly, the purchase of the state bank continues with ferocity without control, leaving little for the rest and hungry private markets.
Both phenomena are symptoms of a single problem: a state apparatus that can no longer generate the necessary resources for their own maintenance. In summary, this implacable hardening of the conditions in the economy, despite the very planned stabilization that has taken place, reflects the erosion of the underlying financial and economic viability of the State and, by extension, of the economy of Pakistan. As currently constituted.
These last three words are key, because it is equally important to remind us that it does not have to be so. But for the moment it is. And the problem is going to be aggravated over time.
Just consider two stories of the week so far. On Tuesday, a group of well -connected business leaders from Lahore and Karachi met with the head of the Army, the field marshal also Munir, to convey their concerns about the increased powers given to the FBR, in particular the arrest powers.
“The delegation presented a complete description of the challenges faced by the industrial sector,” said his press release after the meeting, “with particular emphasis on the recently promulgated expansions of the powers of the Federal Income Board.”
The expansion of the powers refers to the arrest powers enjoyed by the FBR, which have been strengthened in the last budget. Other things were also discussed, but the press release suggests that this was the main reason for the visit, while the opportunity was also used to transmit other concerns regarding interest rates and energy rates.
The relentless adjustment of the conditions in the economy reflects the erosion of the underlying financial and economic viability of the State.
The second story, published in this document, indicates a lasting shortage in dollars that has grabbed financial markets in Pakistan for several months and refuses to disappear. And on Wednesday, Malik Bostan issued a statement, the head of the Association of Pakistan exchange companies, announcing that on Tuesday he met with the ISI in which they were asked to explain why the dollar rate has increased in the open market in recent days.
In his response, Bostan blamed the black market operators, saying that his hand is strengthened the more the State is squeezed in the operations of the exchange company in the formal sector. Meanwhile, the shortage in the banking system persists despite the increase in tickets in the country in the last fiscal year.
Initially, a few months ago, they told us that this shortage exists due to delays in the re -registered of some obligation of Chinese debt. But those flights were secured at the end of June, and another $ 1.5 billion insured through loans from two commercial banks of the Middle East, and government sources confirmed to news journalists that their mandatory IMF objective for foreign exchange reserves at the end of June 2025 had been fulfilled.
Then came the news that the remittances registered a record (they publish a record almost every year, so it is not a big problem), but most importantly, the current account published a surplus of $ 2.1 billion, while the IMF program had projected a deficit of $ 200 million. The foreign exchange reserves of the State Bank were projected by the Fund to be around $ 13.9 billion by the end of fiscal year 2015. In their place, they reached $ 14.5 billion, higher at $ 600 million.
So, if the external sector of the economy has had a better performance than expected, and foreign currency reserves are even higher than was projected, why is there still a shortage of dollars in financial markets? Why are black markets and pressures increase in the open market to the point? One answer is that all the dollars that flow to the country from high remittances and ‘resistant exports’ are being bought by the state bank, leaving little for private players. And the open market, which is also fed by remittances and foreign currency brought by travelers from abroad (according to their own information anyway), is to find customers of the black market by foreign currency at higher prices and, therefore, preferring to maintain a growing part of their transactions there instead of the regulated market, where they are forced to sell dollars at a rhythm according to their friends in Pindi. As a result, reserves are overcoming their projections, while private market actors wonder aloud where all dollars are going. “I am surprised why the State Bank has squeezed the market so severely when it has already fulfilled the objective of the IMF,” says a story published in this document cites a market analyst.
Why in fact? The Government made survive about the metrics of the fiscal and external sector in fiscal year 2015, and do not waste the opportunity to remind us of the rest of us what a great achievement is this, to have stabilized the economy after the epic disorders that did it after 2011. But we are still here. The hunger for dollars continues, hunger for income leaves the hungry state even though it has not only been met, but exceeded some key objectives in the funds program, and this hunger drives them to press more and more in financial markets and compatible taxpayers to extract more and more of them.
This will not end alone. It will continue so because the pressure of resources, fisc and FX in this case, does not come only from the need to meet the objectives of the IMF program. To a significant extent also comes from the need to rearm after the recent war with India. But to a large extent, the pressure is increasing because the lack of reform of the system during the previous years has produced a rigid economy that cannot meet the emerging requirements of a growing economy. Until those reforms or an external rescue come, these pressures will only increase.
The writer is a business and economy journalist.
Posted in Dawn, July 24, 2025
