Outlook uncertain

As the year draws to an end there are some positive indicators on the economy — but risks and vulnerabilities as well. On the positive side there has been a revival in manufacturing and agriculture, and a slightly unexpected rise in tax revenues which has fed through to a strengthening of public finances. The Institute for Policy Reforms (IPR) has reviewed the economy for the first quarter of the financial year 2017-18 and it fingers a complex downside.

The headline story for months has been the current account deficit which has grown by 120 per cent over the same quarter of the last fiscal year, exceeding the overly-optimistic target the government had set itself. Foreign reserves continue to dwindle despite further borrowing to service the debt — robbing Peter to pay Paul has never been a viable strategy — and the government trying to dodge the bullet by saying that the deficit has grown because of the import of growth-producing machinery sounds thin. That said the import of power generation machinery fell by 17 per cent.

The coming year is thick with risks. Dependence on external savings and the recent revaluation of the rupee are likely to reduce imports. Missing the fiscal target this year is going to knock-on to next year and the foreign financing gap is both significant risk and burden with no obvious way of shedding the load. All of this, asserts the IPR, is the result of successive governments being firefighters rather than effective strategic planners — an argument difficult to refute. Structural issues remain unresolved very long term and the weight of historical mismanagement and poor decision-making is coming now to be perhaps the major impediment to national growth and development. It is craven politics that hobbles us today, and the economic structure does nothing to encourage the economy to increase investment and — opines the IPR — favours the privileged and elites at the expense of the rest of the populace — again an argument virtually impossible to refute. Pakistan is politically on rinse-spin-repeat, the victim of a chronic inability to reform. It could all have been so much different.

Published in The Express Tribune, December 25^th, 2017.

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