General elections and economy

Low forex reserves unlikely to allow govt to accelerate economy in near future

LAHORE:

Elections have been held according to the announced date, which has ended the uncertainty surrounding the electoral process.

Initially, the election campaign remained slow owing to the lingering uncertain political situation as the country had been in the grip of rumours that the tenure of caretaker setup will be extended by considering the security and economic situation.

The campaign picked up momentum in the last 15 days. Despite these odds, the turnout of voters remained high as compared to the previous elections.

Elections provide an opportunity to the voters to choose their candidates who are willing to address their issues. If selected candidates do not fulfil their promise, they will vote out those candidates in the next polls.

Since candidates belong to a particular political party, performance of the party is judged based on the commitments made in the previous elections.

Being at the helm of affairs, the party may appease its voters by addressing certain issues. If the issues remain unaddressed, it will provide an opportunity to the opposition party to come to power.

Through the recent elections, the voters reacted to bring their favourite candidates to power.

Like previous elections, the results of the current elections are not being trusted. Apart from a couple of political parties, others are of the belief that the process and outcome have been rigged.

These parties are either staging protests, blocking roads or raising hue and cry on the digital, print and social media. A few losing candidates has accepted defeat while others are challenging results in courts of law.

Some of the losing politicians have announced their retirement. However, the heightened expectations are not allowing the system to move forward.

Read: Seen from abroad, Pakistan elections disappoint, add to instability

The mandate remained divided among the mainstream political parties. None of the parties got a simple majority in the lower house of parliament.

In the emerging situation, a coalition of political parties will form the government. Although the election manifestos of the political parties are different, they will attempt to reach a compromise.

This compromise will somehow reflect the convergence of their interests in the short term. However, the expected political stability could not be achieved. All this happened in the midst of macroeconomic stability.

Under the standby arrangement (SBA), macroeconomic stability has been achieved to some extent.

The rupee-dollar exchange rate appreciated to 280 in the last couple of months. Current account deficit (CAD) has reduced which, in turn, required net borrowing of around $750 million from July to December 2023.

The official foreign exchange reserves have been hovering around $8 billion since July 2023. In addition, acceleration in prices has slowed down slightly to 29%. Despite this stability, political situation is far from normal.

The economy has been operating well below its potential owing to foreign exchange constraints. The low foreign exchange reserves will not allow the upcoming government to accelerate the economy in the near future.

The government has to fulfil the commitments of the SBA to get the remaining $1.1 billion. Moreover, it will require dollars to meet the external contractual liabilities and has to negotiate a new programme to further stabilise the economy.

In a nutshell, timely elections are the symbol of continuity of democracy. The people of Pakistan deserve felicitation, who have exercised their right to vote through polls.

They have to accept the results of elections in the spirit of democracy. The acceptance and patience of the people will allow the politicians to deliberate on a range of possibilities and reach a consensus.

Last but not least, the upcoming government will face many challenges, which will require indigenous thinking and solution. Let us see how things unfold in future.

The writer has worked at SDSB, Lahore University of Management Sciences (LUMS)

Published in The Express Tribune, February 19^th, 2024.

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