The many difficulties faced by the Pakistani economy have been papered over by the PTI government in various ways, one of which is to claim that better days are round the corner, and that crucial figures are looking up. One of the figures touted by the government has been the remittances figure, which has been increasing month-on-month, and which was being mentioned as improving the current account. However, the State Bank of Pakistan is expected to report next week that remittances have been less in April than in March. In the banking sector, based on anecdotal evidence so far, it is expected that the figure for May will be worse.
It is perhaps no coincidence that the growth figure for the current fiscal, will be closer to 2 percent rather than the 3 percent the State Bank had originally projected. To add further perspective, Finance Minister Shaukat Tarin’s 7 percent figure must be kept in mind.
Even the remittances figure, though positive, was no turnaround. Observers were awaiting its collapse with trepidation. Though the upsurge was good for the current account deficit, a permanent change in Pakistan’s current account will only come with a reversal of Pakistan’s trade deficit into a surplus. That has long been an intractable problem, and merely suppressing imports will not work, because fuel, food and medicines, are imported, and are almost rigidly inelastic. The present government has not shown sufficient signs of an ability to tackle inflation, especially of food items, which indicates that its present policy of pretending that people’s knowledge that they are facing a squeeze is an opposition ramp worsened by media hype.
The government should not be as breezily complacent about its performances. For example, foreign debt has not only increased to record levels, but the rate of increase is also a record. This reflects lack of competence rather than anything else.
While in opposition, the PTI wanted to know where the foreign debt had gone, and why it could not be seen in concrete terms in better lives. In the same way, it would find that it could not answer where the new debt had gone. There are still more than two years left in the PTI’s tenure, and if it can do anything about the economy, such as resolving the circular debt issue, or improving the tax-to-GDP ratio, it should do it now.
