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Pakistan’s crisis differs from world | The Express Tribune
1729471601-0/image-(8)1729471601-0-640x480.webp "Pakistan’s crisis differs from world | The Express Tribune")
Multiple elite clusters capture system as each extracts benefits in different ways
Pakistan’s ruling elite reinforces a blind nationalism, promoting the belief that the country does not need to learn from developed or emerging economies, as this serves their interests. PHOTO: FILE
KARACHI:
Elite capture is hardly a unique Pakistani phenomenon. Across developing economies – from Latin America to Sub-Saharan Africa and parts of South Asia – political and economic systems are often influenced, shaped, or quietly commandeered by narrow interest groups.
However, the latest IMF analysis of Pakistan’s political economy highlights a deeper, more entrenched strain of elite capture; one that is broader in composition, more durable in structure, and more corrosive in its fiscal consequences than what is commonly observed elsewhere. This difference matters because it shapes why repeated reform cycles have failed, why tax bases remain narrow, and why the state repeatedly slips back into crisis despite bailouts, stabilisation efforts, and policy resets.
Globally, elite capture typically operates through predictable channels: regulatory manipulation, favourable credit allocation, public-sector appointments, or preferential access to state contracts. In most emerging economies, these practices tend to be dominated by one or two elite blocs; often oligarchic business families or entrenched political networks.
In contrast, Pakistan’s system is not captured by a single group but by multiple competing elite clusters – military, political dynasties, large landholders, protected industrial lobbies, and urban commercial networks; each extracting benefits in different forms. Instead of acting as a unified oligarchic class, these groups engage in a form of competitive extraction, amplifying inefficiencies and leaving the state structurally weak.
The IMF’s identification of this fragmentation is crucial. Unlike countries where the dominant elite at least maintains a degree of policy coherence, such as Vietnam’s party-led model or Turkiye’s centralised political-business nexus, Pakistan’s fragmentation results in incoherent, stop-start economic governance, with every reform initiative caught in the crossfire of competing privileges.
For example, tax exemptions continue to favour both agricultural landholders and protected sectors despite broad consensus on the inefficiencies they generate. Meanwhile, state-owned enterprises continue to drain the budget due to overlapping political and bureaucratic interests that resist restructuring. These dynamics create a fiscal environment where adjustment becomes politically costly and therefore systematically delayed.
Another distinguishing characteristic is the fiscal footprint of elite capture in Pakistan. While elite influence is global, its measurable impact on Pakistan’s budget is unusually pronounced. Regressive tax structures, preferential energy tariffs, subsidised credit lines for favoured industries, and the persistent shielding of large informal commercial segments combine to erode the state’s revenue base.
The result is dependency on external financing and an inability to build buffers. Where other developing economies have expanded domestic taxation after crises, like Indonesia after the Asian financial crisis, Pakistan’s tax-to-GDP ratio has stagnated or deteriorated, repeatedly offset by politically negotiated exemptions.
Moreover, unlike countries where elite capture operates primarily through economic levers, Pakistan’s structure is intensely politico-establishment in design. This tri-layer configuration creates an institutional rigidity that is difficult to unwind. The civil-military imbalance limits parliamentary oversight of fiscal decisions, political fragmentation obstructs legislative reform, and bureaucratic inertia prevents implementation, even when policies are designed effectively.
In many ways, Pakistan’s challenge is not just elite capture; it is elite entanglement, where power is diffused, yet collectively resistant to change. Given these distinctions, the solutions cannot simply mimic generic reform templates applied in other developing economies. Pakistan requires a sequenced, politically aware reform agenda that aligns incentives rather than assuming an unrealistic national consensus.
First, broadening the tax base must be anchored in institutional credibility rather than coercion. The state has historically attempted forced compliance but has not invested in digitalisation, transparent tax administration, and trusted grievance mechanisms. Countries like Rwanda and Georgia demonstrate that tax reforms succeed only when the system is depersonalised and automated. Pakistan’s current reforms must similarly prioritise structural modernisation over episodic revenue drives.
Second, rationalising subsidies and preferential tariffs requires a political bargain that recognises the diversity of elite interests. Phasing out energy subsidies for specific sectors should be accompanied by productivity-linked support, time-bound transition windows, and export-competitiveness incentives. This shifts the debate from entitlement to performance, making reform politically feasible.
Third, Pakistan must reduce its SOE burden through a dual-track programme: commercial restructuring where feasible and privatisation or liquidation where not. Many countries, including Brazil and Malaysia, have stabilised finances by ring-fencing SOE losses. Pakistan needs a professional, autonomous holding company structure like Singapore’s Temasek to depoliticise SOE governance.
Fourth, politico-establishment reform is essential but must be approached through institutional incentives rather than confrontation. The creation of unified economic decision-making forums with transparent minutes, parliamentary reporting, and performance audits can gradually rebalance power. The goal is not confrontation, but alignment of national economic priorities with institutional roles.
Finally, political stability is the foundational prerequisite. Long-term reform cannot coexist with cyclical political resets. Countries that broke elite capture, such as South Korea in the 1960s or Indonesia in the 2000s, did so through sustained, multi-year policy continuity.
What differentiates Pakistan is not the existence of elite capture but its multi-polar, deeply institutionalised, fiscally destructive form. Yet this does not make reform impossible. It simply means the solutions must reflect the structural specificity of Pakistan’s governance. Undoing entrenched capture requires neither revolutionary rhetoric nor unrealistic expectations but a deliberate recalibration of incentives, institutions, and political alignments. Only through such a pragmatic approach can Pakistan shift from chronic crisis management to genuine economic renewal.
The writer is a financial market enthusiast and is associated with Pakistan’s stocks, commodities and emerging technology
Gas prices have leapt at the fastest pace since the outbreak of war in Ukraine, after Qatar halted production of liquified natural gas after attacks by Iran.
Oil prices also soared and global financial markets reeled from the fallout of an intensifying conflict between Iran and US-Israeli forces.
European whole gas prices soared by 52% on Monday, marking the sharpest rise since prices were pushed dramatically higher by the Russian invasion of Ukraine in March 2022.
The surge came after Qatar’s state-backed energy company QatarEnergy said it “ceased production” because of attacks on its facilities.
Qatari ministers had said earlier on Monday that an Iranian drone had attacked one of the company’s production facilities.
Qatar is a major producer of LNG, cooled gas which can be transported via ships, responsible for about a fifth of global supplies.
On Monday in London, the price of natural gas for delivery in April was up by about 43% to 115p per therm.
In the UK, gas prices are a key driver for the cost of domestic energy bills, indicating that a sustained spike could affect households in the coming months.
Neil Wilson, Saxo UK investor strategist, said: “Qatar is a top three LNG exporter, controlling roughly a quarter of expected supply over the next decade.
“Looks like Iran’s tactic is to pressure Gulf states so they in turn pressure the US and Israel to back off.
“I am much more concerned about European natural gas prices than oil prices, in terms of seeing a repeat of the 2022 European energy crisis.”
Global financial markets faltered after intense strikes across the Middle East and attacks on ships drove fears of energy supply disruption.
London’s FTSE 100 was weaker as trading was knocked by the growing conflict between Iran and US-Israeli forces.
The blue chip share index shed 130 points, closing 1.2% lower at 10,780.11.
Other European indexes suffered bigger drops with France’s Cac 40 down about 2.2% and Germany’s Dax tumbling 2.4% on Monday.
But it was a more tentative start to trading over on Wall Street with the S&P 500 relatively flat, and Dow Jones dipping by about 0.1% by the time European markets had closed.
Israel launched strikes on Lebanon’s capital Beirut on Monday after missiles were fired by militant group Hezbollah.
The latest strikes came after the US and Israel hit targets across Iran on Sunday as part of an intensifying military campaign which followed the killing of Supreme Leader Ayatollah Ali Khamenei.
Oil supplies could be affected by the conflict after Iran reportedly warned tankers on the strait of Hormuz that no ships would be allowed to pass through.
UK Maritime Trade Operations Centre officials said that two vessels have been struck near to the key trade artery.
The Strait of Hormuz is used by tankers carrying about one fifth of the world’s oil supplies and seaborne gas.
On Monday, the price of Brent crude oil soared by as much as 13%, rising above 82 dollars a barrel, before paring back.
It was 8.4% higher at 79.2 dollars a barrel shortly before 2pm, before easing slightly to be 5.5% higher at 76.9 dollars a barrel by early evening.
Nevertheless, City analysts have said the markets have been relatively contained so far in reaction to the conflict.
Chris Beauchamp, chief market analyst at IG, said: “While we have seen a significant surge in oil prices since markets opened last night, the gains appear contained for now as we wait to see if shipping through Hormuz can continue at lower levels or will be blocked entirely.
“Oil and gas infrastructure in the region has not yet been extensively targeted, keeping oil well south of the 100 dollar barrel range that many expected as a result of the weekend.”
Meanwhile, the pound dipped in value against the US dollar to its weakest level since December.
The fall is partly linked to the strength of the dollar, with investors pouring funds into the US “safe haven” currency.
The pound was down about 0.8% at 1.338 versus the dollar during the day, before parring back some losses to be down around 0.3% at 1.34 against the dollar by early evening.
London stocks were broadly weaker, with travel stocks among those dropping particularly sharply.
Cruise giant Carnival slid by 8%, while airline firm IAG, the parent firm of British Airways, dipped by 7.6%.
Rival Wizz Air, which typically runs flights to Dubai and Abu Dhabi, was also down 7.3% in early trading on Monday, while travel-focused retail groups SSP and WH Smith were also firmly lower.
However, defence stocks were among the gainers, with BAE Systems lifting by 7.4% to 2,268p.
Elsewhere, oil and energy stocks were also stronger – Shell and BP rose by 4.5% and 3.5% respectively as prices lift.
International stock markets also opened weaker after the start of trading, with the Nikkei 225 in Tokyo falling by 1.5% after Asian markets opened.
Business
Oil prices spike! Will petrol, diesel rates be hiked in India as crude nears $80 mark on Middle East tensions? – The Times of India
Internationally, oil prices have risen by around 9-10% following Israel-US strikes on Iran, and amid the rising tensions in the Middle East are likely to remain elevated. Does that mean that petrol and diesel prices in India will go up?Brent crude, the international benchmark, moved close to $80 per barrel, while US crude futures advanced 8.6 per cent to $72.79, compared with roughly $67 on Friday.
India, which meets about 88% of its crude oil demand through imports before refining it into fuels such as petrol and diesel, faces a higher import burden when global prices rise, along with possible inflationary effects.
Middle East tensions : Will petrol, diesel prices go up?
Despite the sharp increase in global oil prices, retail petrol and diesel prices in India are not expected to be revised upward in the immediate future, according to a PTI report.According to sources quoted in the report, the government is maintaining a calibrated approach that allows oil marketing companies to improve margins during periods of lower international prices while protecting consumers when global rates increase.Also Read | Middle East oil shock risks: How much do China, India, Japan depend on Middle Eastern crude, gas?Pump prices for petrol and diesel have remained unchanged since April 2022. During this period, state-run retailers including Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have absorbed losses when crude prices were elevated and benefited when prices declined.As a result, domestic fuel prices have stayed steady even when global fuel rates climbed due to higher crude costs. Likewise, when international fuel prices softened in line with lower crude, retail rates in India did not see a reduction.Sources added that the government intends to continue shielding consumers under this policy framework, unless crude prices witness an exceptionally sharp surge.With assembly elections approaching in key states such as West Bengal, Tamil Nadu and Assam, the government is keen to avoid developments that could provide political ammunition to the opposition, the report said.
India assesses oil security
Amid intensifying hostilities in the Middle East, Oil Minister Hardeep Singh Puri on Monday assessed the crude oil, LPG and petroleum products situation in a meeting with senior officials from his ministry and executives of public sector oil companies.
Importance of Hormuz for global oil flows
Much of India’s crude oil and gas supplies transit through the Strait of Hormuz, which Iranian authorities have threatened to close following US and Israeli strikes.“They have sufficient buffers to manage this kind of price spike,” a source with direct knowledge of the matter said, referring to oil companies. “We witnessed crude touching $119 per barrel in June 2022 after Russia’s invasion of Ukraine. That year their profits were modest, but in FY24 they recorded a record profit of Rs 81,000 crore.”Should interruptions continue, cargoes may need to be diverted around the Cape of Good Hope, resulting in longer transit durations and higher transportation expenses, along with increased freight and insurance costs.According to media accounts, the ongoing hostilities have in effect shut down the Strait of Hormuz, the vital artery for worldwide energy transportation. Nearly one-third of global seaborne crude oil exports and around 20 per cent of liquefied natural gas cargoes pass through this narrow channel.Also Read | 1970s-style oil shock loading? Crude may hit $100 if Strait of Hormuz shuts amid Middle East tensions – what it means
From the UK, flights have also been cancelled for many Middle East destinations, including all flights to Israel and Bahrain, three-quarters of the day’s scheduled flights to the United Arab Emirates, and more than two-thirds (69%) of flights to Qatar.
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