The Fitch assessment

Fitch Solutions has predicted even gloomier figures in its assessment of Pakistan’s economy. The US-based global research house has revised its GDP growth forecast for FY19 (the outgoing fiscal year) and FY20 (the coming fiscal year) to come to 3.2% and 2.7% respectively, from 4.4% and 4.0% previously. Besides, the rating agency expects little improvement in the country’s net exports that recorded a deficit of 11% of GDP in FY18. It also believes that investment that accounts for some 17% of GDP will slow in growth to 5.1% in FY20 from 5.7% in FY18 while subdued business sentiment will also add to the slower investment growth. However, it sees CPEC investments turning into a bit of solace over the coming quarters.

Fitch has warned that the government measures to tighten its monetary and fiscal policies under the terms agreed upon for the $6 billion IMF bailout would negatively impact the GDP growth. The government, however, calls them ‘corrective’ measures it is ‘compelled’ to take due to years of ‘bad economic management’ of previous rulers. For the government, stabilising the economy is a task that can no longer be deferred even if comes at the cost of economic growth. The government thus continues to tighten the purse strings, with Prime Minister Imran Khan only making appeals after appeals to the nation to bear with the harsh present for a prosperous tomorrow, not realising at all that the masses have already been squeezed dry, and are in no position to say yes to the PM’s appeals for help.

That the ‘tsunami of change’ has transformed into a ‘storm of inflation’ in just 10 months of the new government is pretty evident. Economic indicators, both at the maco- and the micro-level, are nothing to write home about. Besides Fitch, the World Bank, the ADB and the IMF itself had painted a worryingly bleak picture of Pakistan’s economy. All that means tougher days ahead — both for the government and the people.

Published in The Express Tribune, June 29^th, 2019.

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