The SBP governor sees the country heading in the right direction economy-wise. Reza Baqir, the governor, insists that consistency in the government approach and continuity of the economic policies being pursued will “definitely lead [Pakistan] to the destiny of progress and prosperity”. The SBP chief’s optimism fits well into a speech delivered at an Independence Day anniversary event on Wednesday, especially his belief that “if we acted with unity and faith like we did at the time of Pakistan movement, the prevailing conditions would surely change.” However, numbers are purely objective in nature, and the numbers concerning key economic indicators do not augur too well.
To recall, Pakistan signed a $6 billion worth of economic bailout package with the IMF in May, and the loan programme binds the government to undertake structural reforms which have so far resulted in an increase in the key interest rate to an eight-year high of 13.25% as of July; depreciation of the rupee by 32% to Rs160 to the dollar; and a repeated upward revision in power and gas tariffs, a consistent raise in fuel prices as part of monthly review, and new tax mechanism for traders and businessmen in order to make an ambitious Rs5.55 trillion tax-collection target for the current fiscal year possible.
The reform programme, as it is called, has so far managed to narrow down the historically high current account deficit and has helped the inflow of significantly higher remittances from overseas Pakistanis in July, but it has also brought the economic growth rate to a nine-year low of 3.3% in the fiscal year ending on June 30, 2019 and turned inflation into a double-digit demon — 10.3% as of July — after a long gap of 68 months. This double impact — of the fall in growth rate and the rise in inflation — has literally squeezed the masses dry, and they are desperately waiting for the SBP chief’s optimism to come true and the “right” decisions taken by our economic managers to start bearing fruit.
Published in The Express Tribune, August 16th, 2019.