Time for a solution !
THE precarious state of Pakistan’s economy requires long-term planning, across the board consensus and structural reforms. Early elections may provide respite and lead to the reduction of political instability thus providing clarity, nonetheless, the new government should also brace itself for harsh criticism from the opposition benches and resentment of the public as they will have to keep the economic turmoil at bay.
The economic crisis seems far from over, no more dilly-dally in the IMF program is highly essential and in order to enter the program the government will have to abide by the harsh conditions of the Fund which will irk the general public and turn out to be a nadir in their popularity.
The government needs to focus on fixing the un-resolved structural issues which remain inherent in our economic system since decades. Focus should be on increasing and diversifying exports, widening the tax base, luring foreign investment, reducing circular debt, increasing agricultural productivity, enhancing climate resilience and taking measures for curtailing ‘brain drain’.
Fiscal deficit needs to be checked which is a significant source of economic crisis. The availability of easy loans from US and other friendly countries along with high remittance inflows in the past lead policy-makers to pull the plug on reforms, however, now we need to that foreign loans are not something to be relied upon, rather they are a short-term solution and are not always guaranteed.
The present state of economy is in deep waters as the economic indicators like exports, remittances and LSM growth are on the downward trajectory whereas inflation remains elevated. Inflation pressure is not expected to subside despite SBP adopted hawkish stance in the recent monetary policy.
The global economy is also experiencing a slowdown which may further aggravate the local economic conditions. The continuity of IMF program remains in limbo as the incumbent government is unable to take concrete measures to win the confidence of the Fund. No doubt the government remains wary of the political cost it may have to bear undertaking these measures considering fresh elections in a few months.
With reserves shrinking to $4.601 billion, a liability of approximately $3 billion in the remaining half of FY-23 and emergent requirement of $8 to $10 billion in foreign loans, restoring IMF program is inevitable. This will also open other avenues of foreign aids for the dollar starved economy.
However, rather than just celebrating securing external financing, we need to understand these measures may definitely provide short=term relief, nonetheless, the long-term outlook remains gloomy. $6 billion has already been rolled over in first half of FY-23 and $3 billion will be rolled over in remaining half which eventually has to be paid.
With liabilities amounting almost $75 billion in the next three years, it is high time policy makers should understand the gravity of situation and considering the strategic importance of Pakistan realize the fact that weak economy may also compromise the national security of the country. All the stakeholders should come to the table to break the ice rather than flexing their muscles which may lead to an impending disaster and thus the country’s economy will never be able to come out of the woods ever.
—The writer is contributing columnist.