“Failing to plan is planning to fail.” This Chinese proverb precisely defines the current situation of Pakistan economy. It would not be wrong to say that the economy of Pakistan is indeed in a very bad shape. All the economic indicators are showing downward trend. Economic growth has slowed down to its lowest rate in seven years, inflation is consecutively high and the government is short of funds to pay its debt.
The newly elected government is facing formidable macroeconomic challenges; the rising fiscal and external account deficits, declining exports and the massive rupee devaluation against dollar added fuel to the fire. Financial performance during the first fiscal (FY2018-19) of newly elected government is unsatisfactory, the growth rate fell by almost 50 percent and expected to go down even further to 2.4 percent next year, which will be the lowest in the past 10 years.
It is no secret that the outgoing fiscal year (FY2019) witnessed a muted growth of 3.3percent against the ambitious target of 6.2 percent; it is worth mentioning here that the growth momentum during FY2018 was at 5.5 percent. Furthermore the Agriculture sector grew by only 0.85 pc against the target of 3.8 pc, the industrial sector grew only by 1.4 pc against a 7.6pc target, a phenomenal increase of 9.4 pc in headline inflation (CPI) witnessed during March 2019. In short, government absolutely missed all the targets of key economic indicators for FY2019.
On contrary; compared to the previous government, the number shows that they delivered good economic performance. Starting from the Tax to GDP ratio which increased from 9.2pc (FY2013) to 12.1pc (FY2018), the GDP growth rate accelerated from 3.7pc (FY2013) to 5.8pc (FY2018), and not to mention the boom of Stock Market.
Not more than two years before, most of the international rating agencies were praising the robust economic performance of Pakistan, but was it an actual economic success? Or just helped and hyped by the huge China Pakistan Economic Corridor (CPEC) projects investment, lower oil prices and last but not least the better security situation in country due to the operation “Zarb-e-Azb” which shaped the investor’s confidence. Nevertheless dipping exports remained the core issue throughout.
Economic slowdown cost 30 to 40 percent worker’s jobs:
Due to the overall economic slowdown over 30 percent of Pakistan’s workers lost their jobs, this economic turmoil pushing more people below the poverty line. All the large industries are facing survival challenges. Industries are dying because of the skyrocketing inflation there is a nonexistence of customers, automobile industry is also on the verge of collapse.
The recently signed IMF program implemented tough measures including high tax rates, increased energy prices, massive rupee devaluation, and higher interest rate. These measures are hindering industrial growth causing a huge production cut which leads to the unemployment in society.
Month of October will further decide the Economic fate?
The upcoming month of October is very important for Pakistan; FATF court in Paris will decide the possibility of exclusion or inclusion of Pakistan into the “Grey list” and this decision is going to put a direct impact on current economic status.
Recently Asian development Bank (ADB) forecasts the poor development of Pakistan economy; according to ADB growth rate of ongoing fiscal will be further slow at 2.8 percent which is the lowest in south Asia.
The year 2018 was poor for emerging markets. Global monetary tightening and increased oil prices reduced the investor confidence. Furthermore the previous economic boom was built on weak fundamentals and heavy foreign assistance. Therefore; to avoid the further financial slowdown economic policies must be revised and further adjustments in balance of payment will be needed to put economy back on the path of recovery.