Does the government continue to follow the dictates of the IMF, or does it start taking steps to ensure its re-election? It has to be agreed that so far, the news has been good, and the latest figures for June-November, the first five months of the financial year, indicate that there is progress being made. However, the latest news, of a surplus on the current account of $910 billion, which is a vast improvement over the deficit of $1.676 billion recorded at this stage last year. It should be noted that not only have record remittances of $14.8 billion been recorded, but the trade deficit has narrowed year-on-year to $$10.85 billion. Both are a reflection of the improving economy in the West, where inflation is finally coming under control. While the remittances are up because there are more jobs, an important role has been played by the crackdown on moneychangers, who were such a channel of illegal exchange. Another important source of improvement has been the reduction of the gap between the interbank and open markets, thus reducing the incentive to use informal channels.
The improvement in both textile exports, which have gone to $7.25 billion this year from $6.88 billion at this stage last year, and IT exports, which are averaging higher than last year, reflects an overall improvement in the Western economy, meaning that while the government relies on both sectors for growth in exports, it cannot do much to help. To take textiles, which are critical to the government because it is expected to provide the jobs the government wants to combat unemployment, the growth in exports is because its domestic turmoil is preventing Bangladesh from fulfilling orders, so Pakistani exporters are stepping in. It is not a good business strategy to depend on political instability in a rival’s country, especially when your own stability is constantly under threat.
Perhaps the most important factor for Pakistan has been the stability of oil prices. That has contributed to the relative stability of the rupee, which has been key in boosting exports, and has prevented a major rise in imports. At the same time, there is little the government can do to control this factor. All it can do is keep an eye on where the oil piece is going, and be ready with a contingency plan to deal with its rise.
