There is some silver-lining for the economy. It is widely hoped that Pakistan has averted the pending crisis to default, and is gradually picking up. The staff-level agreement with the IMF, likely to get the Board’s approval shortly, has bolstered economic momentum and a tranche of $1.2 billion will set the ball rolling. This will not only help in addressing the balance of payments issues, but also reflect well on the current account deficit that stares at around $17 billion, against a plummeting rupee. Experts believe that crucial policy amends and austerity measures have stabilised the situation and that, of course, pertained to rise in oil and energy prices as well as a slap on auxiliary imports. But with inflation out of bounds and jittery feelings all around in the bourses, a lot of fence-mending exercises are indispensable.
The good news is that the rupee is improving against the greenback, and the demand for the latter is weaning. It comes in cohesion with remittances that are stable, and are likely to meet the target of $30 billion this year. Last but not least are the results of economic diplomacy, which is likely to see a cushion of around $4 billion pouring in state coffers. This was essential as a precondition from the Fund too, in an attempt to shore up reserves before it parts with its pie in the economic circle. The credit goes to the military leadership, as well as astute leg work from the finance ministry, for making that happen. Thus, forex which was in a nosedive mode at less than $9 billion will see a decent upward rise if exports too come to its rescue.
It’s time for Pakistan to walk a tightrope, and ensure that the burden that has piled up on the masses is lessened. With inflation at over 22% amidst a battered rupee, a lot of microeconomic homework is needed. While the tranche from IMF and commercial loans from friendly states might bail us out of the exigency situation, the country is in dire need of a sustainable economic policy, coupled with political stability. The scale of spending against income is up for a litmus test.
Published in The Express Tribune, August 12th, 2022.
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