APPARENTLY satisfied by the direction his Government is heading to, Prime Minister Imran Khan, last month urged all to judge the performance of PTI after completion of its constitutionally mandated five-year term but the ground situation is not encouraging and a number of developments taking place on Thursday should send alarm bells among the policy-makers.
The rupee closed at an all-time low of 176.42 as investors worried about the outlook for the country’s economy experienced one of the worst days in the history of the Karachi Stock Exchange as its index recorded the third largest one-day loss ever of 2,135 points amid deepening concerns over widening current account deficit.
According to the dealers, the magnitude of the crisis can be gauged by the fact that the crash of the stock market wiped off $1.9 billion (or Rs. 332 billion) in losses to investors in share values, due to economic fallout from blooming trade deficit and fear of another rate hike.
Analysts also believe that the tough conditions set by Saudi Arabia for its economic bailout package have also unnerved investors.
It is all the more regrettable that no remedial measures are in sight despite acknowledgement by the concerned officials about the factors and reasons behind the worrying situation.
Only recently, Advisor on Finance Shaukat Tarin, categorically stated that the rupee is undervalued by Rs. 10 against the dollar but it was because of state of inaction both by the Finance Ministry as well as the State Bank of Pakistan (SBP) that there is shortage of the dollar and no one is able to get it less than Rs. 180 a dollar from the open market.
Investors are also losing confidence due to lack of timely initiative on the part of the Government to curb unnecessary imports that are jacking up the trade deficit to alarming levels.
The officials celebrated exports worth $2.9 billion against the target of $2.6 billion in November but the data released by the Government itself revealed that imports also surged by 76%.
In this backdrop, the Finance Advisor directed concerned officials to take effective measures to reduce unnecessary import of luxury goods but in the absence of clear policy directions this objective is unlikely to be achieved.
The Government believes there was pressure on import bill mainly due to global high commodity prices, especially energy, steel, and industrial raw material as well as import of Covid vaccines.
This is in sharp contrast to the previous position of the Government that the import bill was on the rise due to import of plant and machinery, describing it as a healthy sign for the economy.
In fact, trade balance is worsening at an accelerated pace, as it rose sharply to $5.11 billion in November 2021 against $1.94 billion in the same month of the last year 2020, witnessing a surge by 163 percent. The overall trade deficit has risen sharply and stood at $20.7 billion in the first five months (July-November) period of the current fiscal year as the exports fetched $12.37 billion but imports went up to $33.11 billion.
There is no doubt that exports as well as home remittances by overseas Pakistanis are increasing but they are not matching the pace of increase in imports, which is a worrisome indicator.
It is also lamentable that despite tall claims by the Government there is no indication as yet that the problem of the circular debt would become manageable in the foreseeable future.
The Cabinet Committee on Energy was told on Thursday that the monthly addition to the circular debt stood at Rs. 35 billion and the overall stocks of the circular debt touched heights and climbed to Rs 2,419 billion till end October 2021.
The rumours about possibility of further hike in the interest rate by the central bank are also negatively impacting upon the overall economic situation.
The mini-budget worth Rs. 600 billion and the continued rise in prices of all items would complicate things for the common man in coming weeks.
The Prime Minister has desired formulation of an effective media strategy to highlight various achievements of the Government but how can a strategy deliver when negative indicators cast dark shadows on good things.
The image has much to do with the day-to-day problems of the people and ability of the Government to address them effectively.