The gloominess gathering over the country’s economy is expected to exacerbate like the previous boom and bust cycles experienced in the last decade or so. The reality of the situation demands extreme measures and the incumbent government has bitten the bullet and embarked on a path of economic reforms which will hopefully result in a more robust outcome than previously experienced.
However, putting the entire blame on the Pakistan Tehreek-e-Insaf government would be a foolhardy exercise and hijacking of narratives by politically driven anchors on television will add to the never-ending bickering. So called analysts devoid of any understanding of economics will launch their tirade without providing an unbiased analogy of the events creating tumult in the economy. Problems which have plagued our economy for decades now, cannot be undone by using a magic wand and expecting an instant relief/recovery.
Failure of previous administrations to bolster the economy has been borne by the public for way too long, however the ineptitude and unwillingness to undertake the path of stringent reforms has always remained an illusion. I am not an economic wizard or expert to provide an in-depth analysis of what is wrong with Pakistan’s economy, that is a job best left reserved for the finance minister and his team.
It is an unpleasant scenario where rising inflation, cost of borrowing, depreciating rupee, diminishing earnings is wreaking havoc on the public and adding to its miseries. However, these repeated boom and bust cycles have left the economy reeling, temporary surge in growth for a few years tends to be followed by a recession and the cycle keeps continuing. Ironically, external and domestic levels of debt have soared to levels unforeseen, tax collection has plummeted, fiscal, trade and budget deficits touched record highs although the measures taken by the PTI administration to rein in trade and current account deficit have begun to bear fruit.
Since December 2017, the rupee has depreciated by more than 34% against the greenback but it has failed to stimulate exports which in the first nine months (July-March) of current financial year 2018-19 rose 0.1% year-on-year to $17.08 billion compared to $17.06 billion in same period of FY17-18. Imports during the aforementioned period declined 8%, touching $40.76 billion in July-March of current FY18-19 compared to $44.28 billion in corresponding period of FY17-18
And rising international oil prices will put more pressure on the country’s precarious foreign exchange reserves besides debt repayments becoming due during this ongoing month will drain our already thin resources. Financial constraints and the impending IMF programme will limit the incumbent administration efforts to bolster economic growth and require undertaking excruciating decisions which include hiking the power and gas tariff, reducing the circular debt in the power sector and increasing tax collection alongside attracting foreign direct investment (FDI), remittances from overseas and other reforms to put the country on the path towards economic prosperity.
The overall slowdown in the economy will raise hue and cry besides adding to the insurmountable problems plaguing the public. Joblessness and unemployment will exhibit an increase much to our consternation, problems will amplify as essential commodities, utilities become exorbitant and squeeze us from all corners. This price has been paid before during the peak of the financial crisis in 2008 when Musharraf’s consumerism led growth strategy of the economy was splintered after oil prices touched a high of $147 a barrel and caused everything to capitulate including the stock market.
Unlike the PPP and PML-N government, the PTI administration has an excellent opportunity to undertake stringent reforms which could benefit Pakistan’s economy in the longer run and help it stay away from the clutches of the IMF. For that to happen, it needs to avoid a confrontation with the opposition and focus on the job at hand instead of crusading over social media regarding the economy and other important metrics which may define or tarnish its legacy.
The path to the next two years is clouted with trepidation and the populist agenda on which PTI was elected seems to be waning away as it gets replaced by the magnitude of the reality it faces and how it intends to fix it will be interesting to watch. If a similar approach is used as adopted by previous governments, the economy will be plagued by the ills that have currently and previously threatened it. Efforts should concentrate on mobilizing and channelizing its resources towards resolving the weakness that plague the economy whose benefits would take time to accrue.
As the financial squeeze sets in due to rising inflation and as a slowing economy stings various sectors, the path to prosperity is contingent on how the incumbent administration policies unfold over the next year or so remains to be seen.