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Pakistan now faces formidable obstacles in coping with the economic crisis in order to meet its balance - of - payments obligations and avoid economic default.

In the current fiscal year 2021-22, the budget deficit is estimated to be around Rs5,200 billion. The power sector will have a circular debt of Rs2,500 billion. The trade deficit has risen by 58% to over $45 billion, while the current account deficit is expected to be around $16 billion.

The forex reserves fell to $9.7 billion as a result of excessive imports and exchange rate pressure, just enough to cover 1.5 months of imports.

The Pakistani rupee has been steadily losing ground against the US dollar, falling to Rs202 from Rs180 per dollar. As a result, despite a raise in the interest rates to 13.75 percent, inflation has grown to 14%.

The total public debt has risen to Rs44,365 billion, or 75% of GDP. As a result, debt servicing will be around Rs3,900 billion in the coming fiscal year. By March 2022, total foreign debt and liabilities had risen to $128 billion.

The government is in a difficult position since it will have to pay $21 billion in external debt payments to international creditors in the coming fiscal year.

In the midst of political turbulence and uncertainty, the country is experiencing a severe economic crisis.

If timely policy behaviour and corrective policy measures are not implemented, the country may face default and a crisis similar to that experienced by Sri Lanka, which will have far-reaching consequences for inflation, growth, and employment, as well as adverse effects on the poor and vulnerable segments of the population.

To avoid an economic default, Pakistan has no choice but to agree stringent IMF terms in order to restart the IMF programme.

We are all aware that the country has already participated in 22 IMF programmes in the past, and that IMF programs and policies have not proven to be a cure for the country"s economic problems.

It"s worth noting that the majority of our economic troubles have spanned the last 15 years, owing to the country"s massive budget and current account deficits.

Consequently, these deficits have been sustained by borrowing from overseas, increasing the country"s debt burden.

Due to insensitive economic and financial expansionary fiscal policy, higher government expenses, losses of state-owned industries, untargeted subsidisation, fixed exchange rate strategy until 2017, and import-driven expansionary fiscal policy of the outbound government in 2022, the nation with nuclear capability now faces a dilemma, resulting in a high current account deficit and putting pressure on the exchange rate, resulting in a persistently high double-digit inflation rate.

Despite the fact that the new government has taken steps to eliminate subsidies on petroleum goods and impose import restrictions on non-essential items, the country urgently requires political agreement on an economic charter endorsed by the establishment in order to avert an economic disaster. Over the next few months, difficult decisions will be required to stop the haemorrhage caused by overspending and over-importing.

First and foremost, Pakistan must resume IMF assistance by undertaking economic reforms in order to regain market credibility, as well as continue to receive CPEC funds.

Reforms to minimise massive trade and current account deficits would necessitate significant reductions in spending and imports, but without affecting the cost of living of low-income families, whose lives have been made unpleasant by persistently rising inflation in recent years.

The government"s economic reform plans must involve halving the budget and current account deficits in the next year by cutting the budget deficits by Rs2,000 billion and non-essential imports by $10 billion, both of which are spent by the wealthy.

To avoid a financial crash and halt the fast decline of the Pakistani rupee versus the US dollar, import reduction must be done within the first three months.

This is necessary for upper-income households to tighten their belts and send a message that the poor are not victims of the previous government"s economic incompetence. The following initiatives must be included in the economic reform programme:

First, we must restrain the growth of highly import-dependent companies (cars, luxury products, electronics, and so on) manufacturing for the home market through tax and credit measures.

Second, all exporting sectors should be declared tax-free manufacturing units, with all utilities provided at regionally competitive costs and with credit subsidies. Bangladesh"s exports have climbed to $45 billion as a result of this strategy.

Third, compensating for the spike in power, gasoline, and food prices by providing Rs800 billion in targeted subsidies in the form of cash grants to 30 millions poor and vulnerable families through the BISP register system.

After specialized subsidies are in place, market prices for these commodities can be raised through higher tax rates and import levies, generating cash for targeted subsidies to the poor and vulnerable.

Fourth, non-development government spending must be cut by Rs1,000 billion by reducing waste in government - military organisations, cutting development expenditure and lowering throw-forward with the exception of dams and water management, privatising loss-making SOEs, and reducing untargeted subsidies, with the exception of dams and water management.

Fifth, a tax to earn Rs1,000 billion is required to reduce the national debt. This tax can be levied on I all assets (vehicles, agricultural land, urban real estate, and PSX shares) owned by individuals with assets of much more than Rs5 crore; and (ii) capital gains on property investment and shares, as well as profits of major corporations. The rich elite should make this sacrifice in order to save the country.

Sixth, lower deposit and loan interest rates by 5% by lowering the discount rate to 8%. This will lower the cost of financing for businesses, resulting in faster GDP growth and employment.

Higher interest rates on national savings instruments can provide income security to low-income retirees and widows. The goal should be to save roughly Rs700 billion per year on interest on domestic government debt.

Finally, the country should impose a one-year ban on all imported cars, cellphones, non-essential food, and manufactured home-use goods, with the goal of reducing imports by $8-10 billion next year, reducing the current account deficit, strengthening the domestic currency against the US dollar, and accelerating growth and job opportunities.

The author holds a PhD in Economics from Sussex University in the United Kingdom it has more than 37 years of experience in high positions in national and international organisations.