It’s not just about default or not

Pakistan’s economy is in dire straits. There are no two opinions that it is stagnated, and is on the verge of a formal default. The Finance Minister thinks otherwise, though. Ishaq Dar has assured the investors and traders, while talking to bourses dealers last Wednesday, that Pakistan will never default, and advised the businessmen not to lend an ear to rumour-mongers. Though the finance wizard tried to put up some decent explanations by hiding behind exigency, his body language was not supportive of his claims. He was visibly disturbed and seemed concerned as the economy is not performing well and hangs at the cliff of balance-of-payments dilemma.

The point is that there is a serious economic crisis, and the figures at hand paint a dismal picture — in fact threatening. Foreign exchange reserves have slumped to something around $6 billion, and the canvas of remittances from abroad has shrunk remarkably, as compared to the corresponding period last year. Foreign direct investment, while already meager, have declined by half in the first five months of the ongoing fiscal year; and exports figures too are not something to write home about, having suffered a 3.8% fall so far this fiscal year. While banks are not in a position to open new letters of credit (LCs) owing to dipping forex reserves, necessary imports are perishing by languishing at sea ports. This pins at a technical default, at least, on the domestic side. But Dar may be right in saying that the geostrategic scope of the country may prevent it from defaulting on the sovereign side of its commitments, but the flak is evident as credit rating agencies have posted the country in negative benchmarks.

Political stability and economic vibrancy are two immediate and indispensable necessities. The system in vogue cannot linger on without it any longer. This deficiency is letting the country down and social strata are in a fix. With inflation hovering at 45 per cent, and the rupee in a stampede of its own, microeconomic mismanagement is at its worst. Prices of staple diets have skyrocketed, and fresh fruits and vegetables have become a luxury. With import of wheat looming overhead, and stocks of edible oil unable to get a clearance for lack of payment, a food crisis seems just around the corner. All this well portrays the plight of the common man who cannot be squeezed any further.

The best way to overcome this crisis — which is aggravating by the day — is to rewrite the rules of economic engagement and opt for genuine austerity. Engineering solutions in ad hoc sense of governance have not delivered, and they will not. The economy is in need of being fixed upside down, and the debate should graduate from default or not to a paradigm wherein the country resiliently plans its own food security and overcomes energy deficiency through alternate means.

Published in The Express Tribune, December 30^th, 2022.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.