Elite capture is the real issue plaguing Pakistan’s economy

Pakistan’s economy has shown glimmers of hope in recent months. The inflation rate was 9.6 percent in September – the first single-digit reading in three years and a stark contrast to 27.4 percent recorded a year ago. Fuel prices have fallen, largely due to decreasing oil prices worldwide. The executive board of the International Monetary Fund (IMF) has approved a USD 7 billion loan package over 37 months to ease Pakistan’s unending economic crisis – the country’s 24th such bailout in the 77 years since its independence. Islamabad has undertaken a round of economic reforms to appease the IMF and smoothen the passage of the bailout.

But electricity prices continue to rise and the prices of medicines have gone up considerably. Tax increases have hit the vast majority of people. The government raised indirect taxes in 2023, hiking the General Sales Tax, which is applied to all parts of any supply chain, from 17 percent to 18 percent. Income tax for the salaried class was raised drastically up to 35 percent. In addition, the government is mulling a fixed taxation system that has provoked protests among non-salaried classes, especially traders. Taxpayers have received, and can hope to receive, no additional benefits in return. Public schools, colleges, universities and hospitals remain extremely poorly funded and the majority of Pakistanis turn instead to expensive private providers of education and healthcare. The net result has been that people’s actual purchasing power has declined.