The downslide of the rupee and soaring inflation at 22% have pushed the economy in dire straits. It is literally on tenterhooks, and efforts to stem the rot are not producing desired results. The confusion is evident from the fact that the government has once again lifted the ban on import of non-essential and luxury items for reasons of exigency. This will severely impact the allocations of the fiscal year and push the country towards many piecemeal measures, further unnerving the statistics. Presently, the fiscal deficit looms at Rs3.5 trillion and has increased by 5.2%, pressurising the Central Bank to raise the interest rate by 125 basic-points to 15%. This is a precursor to disaster, as the country is under the debt of around $126 billion and current account deficit has crossed $17 billion.
The sluggish picture demands an out-of-the-box solution. While the staff-level agreement reached with IMF for $1.7 billion seems to have hit snags, the economy is reeling under a severe balance of payment crisis. To compound the situation is the flight of the dollar, which is now eyeing the psychological ceiling of Rs250. The rupee in the last four months of the coalition government has lost its value constantly by 0.50 paisa per day i.e. 13.7% of its value. This bleeding of the fiat is fraught with serious consequences, and a default is a happening possibility if the coffers are not stuffed with greenback. With less than $9 billion reserves, it is a catch-22 situation.
Pakistan has to instantly address its balance of payment problem and at the same time pull the rupee out of the stampede zone. This can only be done if foreign remittances as well as exports are soared and the country is in receipt of more than $40 billion on its own. The debt that will keep the country bogged down for another 25 years in quagmire is the biggest impediment on the path of self-reliance. This shackle must be broken, and the best way to do it is to re-orient the tangibles and tap the underlying potential in agrarian, mineral, tourism and entrepreneur horizons. Sitting idle by relying on loans is suicidal.
Published in The Express Tribune, July 30th, 2022.
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