Deficit quagmire

A sorry state of affairs is haunting economic recovery. Structural imbalances and ad hoc policies are behind the decay. That was evident as the SBP reported that Pakistan's external financing position has once again taken a plunge in December 2025 due to rise in imports and a persistent fall in exports. That has inevitably pushed the current account back into deficit.

The statistics are quite bothersome as we exported only to a meagre tune of $2.75 billion, whereas exorbitantly imported goods worth $5.74 billion in December. Likewise, the FBR missed the target in the outgoing month by Rs330 billion, and merely survived as remittances accounted for $3.59 billion at the sunset of last year.

The economy is not picking up as growth remains subdued at 2.7%. On the other hand, FDI has plunged by 43% in the first half of the current fiscal year. The lackluster investment climate was evident from PIA failing to attract any foreign buyer.

Last but not least, the country recorded a current account deficit of $244 million in December, compared with a $98 million surplus in the previous month, bringing the cumulative six-month figure to a deficit of $1,174 million. This nightmarish picture necessitates some auto-correction, and the economy cannot be revived until and unless institutional reforms are initiated.

With debate underway on whether to enter into a new IMF programme or exit it altogether, the fundamentals of the economy call for 'quality' growth. Only by creating new jobs – as unemployment has risen to a 21-year high of 7.1% in FY25 – a rise in per capita income can be assured. Strengthening and expanding the export base is only possible if energy prices remain competitive, and are brought down, and the focus shifts to employment-intensive activity.

Moreover, it is a pity that an agrarian economy is compelled to import food grains owing to its failure to adapt and increase per capita yield. Grooming services sector with knowledge-based manpower and opting for genuine austerity are other essentials for staying afloat.