It won’t be an exaggeration to say that this question requires a doctoral-level thesis even to summarise the argument. Economic experts have varying views on it, and they come up with different sets of rationale. The country’s economic crisis is multipronged, and if we solve one problem, another pops up.
Even if former finance minister Shaukat Tarin’s contention that the PTI has left the economy in a better shape than it had inherited in 2018 is not rejected out of hand, the challenge of turning it around, or at least providing some relief to inflation-stricken citizens anytime soon, is a formidable one for the new set-up. However, exaggerating the ‘facts’ will not help either. The estimates of the twin fiscal and current account deficits given by Miftah Ismail at his Tuesday presser are on the higher side. But then, we have seen this pattern before: every new government needlessly amplifies the economic crisis to discredit their predecessors.
In the present case, the current account deficit is growing but is unlikely to reach the $20bn mark as claimed by Mr Ismail. The fiscal deficit is burgeoning, and may cross the previous government’s estimates of slightly over 6pc of GDP. Yet it is an exaggeration to say it would increase to 10pc by the close of the current fiscal year. Reserves are down. Yet, as the State Bank says, Pakistan’s external financing needs for the present fiscal are “fully met from identified sources”.
The economy is in deep trouble, and indeed in a worse state than what the PTI had inherited; there is no denying these facts. The situation is complicated by the IMF decision to delay the $1bn tranche due to the third tax amnesty given by the previous government to the wealthy, as well as political uncertainty in the country. China is taking its time to roll over its debt of nearly $2.5bn as it waits for the political dust to settle. Once the IMF is back as expected, since Mr Ismail has promised to honour Islamabad’s commitments to the lender, and China rolls over its loan, the reserves are likely to start rising.
The second reason the deterioration of state institutions, and the third one is our failed market, The country’s regulated market is stopping various economic transactions. Undoubtedly, higher and easier transactions are the source of production and economic growth.
It is clear that all these issues are interconnected. The first step is to change the nature of our state apparatus and shift back to a socio-economic developmental model.
This shift in the outlook is likely to lead to better policymaking in other relevant sectors like education and industry.
The country is in a dire need of structural reforms. The sooner we make this switch the better it will be. Otherwise, we will continue our downward trend in the socio-economic sector.
The second reason the deterioration of state institutions, and the third one is our failed market, The country’s regulated market is stopping various economic transactions. Undoubtedly, higher and easier transactions are the source of production and economic growth.
