The State Bank Governor’s Annual Report for FY2023 describes the state of the economy as “cautiously optimistic.” During the current fiscal year, it anticipates that headline price inflation would decline, the current account deficit will close, and GDP will grow.
The paper cautions that this view is dependent on the lack of unfavourable shocks from geopolitical tensions, unanticipated climatic occurrences, and unfavourable changes in global commodity prices.
Apart from that, the bank projects that GDP would increase by 2–3%, inflation will drop to 20–22 percent, and the current account deficit will close to 0.5–1.5 percent of GDP. Even if the recovery is only expected to be small, it is consoling following a turbulent year in which Pakistan just managed to avoid default.
According to the research, “the economic landscape of Pakistan has faced unprecedented challenges throughout the fiscal year,” and political unpredictability had an additional effect on consumer and corporate sentiments, which in turn affected economic activity. Without a question, fiscal policy plays a crucial role in both our rising inflation and balance-of-payments crisis; the bank cannot fully escape its responsibility. When it comes to controlling inflation and halting the dollar’s flight, the SBP has lagged behind and its previous forecasts have frequently turned out to be incorrect.
Even while the past cannot be changed, many people are curious about whether our leaders have learned their lesson and are equipped to handle the difficulties that lie ahead now that 2023 has passed. Stabilisation should occur this year. After the elections in February, the newly elected administration will begin its tenure with a heavy task ahead of it.
Its primary and most important task would be to negotiate a larger, medium-term IMF
In reaffirming the “SBP’s commitment to maintain price stability,” the report emphasises the “critical role of effective administration and fiscal policy in supporting stability.” However, the majority of prior SBP reports—including the bank’s monetary policy statements—have included similar claims in recent years. Negotiating a larger, medium-term loan from the IMF to stabilise the external sector and raise money from other bilateral, multilateral, and commercial creditors to increase the nation’s foreign exchange reserves would be the first and most important hurdle for it.
A contract of this kind would require a number of challenging structural, governance, and budgetary improvements. The question is, will a government that came to power through a sullied election and dubious mandate be able to carry out the necessary reforms and make difficult choices? Pakistan’s future course will be determined by events that transpire in this year. Many nations have been able to use their crises as a chance to improve their individual economies.
Every one of our economic problems, such as the persistent balance-of-payments deficit and the lack of foreign All of our economic problems are solvable, including the current foreign exchange shortfall and balance of payments crisis. We can choose to go in one of two directions at this pivotal point: either towards a more promising and wealthy future or towards complete collapse. Everything is within our control.
