Pakistan’s forex reserves have fallen to a disastrous $6.7 billion, the lowest level in four years and not at all shocking, considering the year we’ve had. The country still needs to pay off its mounting debt and continues to look towards external bodies for financial help. We received $500m from the Asian Infrastructure Bank last week and are in the midst of negotiating a $4.2bn package from Riyadh but even with this assistance, Pakistan still needs to pay off another $28 billion in debt before it meets its targets. Despite assurances from finance minister Ishaq Dar, it is clear that the economy is in a lot of trouble. In fact, his cavalier attitude could hurt Pakistan’s relationship with the IMF which is hesitant to formalise its $7 billion in aid until the country introduces macroeconomic reforms that could protect it against financial volatility in the future. According to the World Bank, Pakistan’s economy is expected to grow a mere two per cent in the current fiscal year and poverty will likely also escalate in regions hit hardest by the floods. Indeed, flood-related disruptions are partly to blame for the economic crisis but the country has hardly seen any economic stability since its genesis. Relief measures may be needed to cushion the impact of the floods but macroeconomic restructuring is the key to Pakistan’s survival. Over the past 50 years, Pakistan’s record in macroeconomic management has been mediocre at best. While the country has successfully avoided large-scale banking crises, such as in Indonesia, it has approached the brink of such a crisis many times and devoted most of its energy to crisis-aversion programmes, which has slowed down economic and social development considerably. Short-term actions may stabilise the economy for the time being but unless Pakistan follows up with structural reforms, its weaknesses will continue to haunt it forever. The country is faced with a chronic imbalance between its public sector income and expenditure largely owing to alarmingly low rates of taxation. Only a small number of people file their tax returns and many continue to underreport income, especially in the corporate sector, meaning that there is a glaring lack of transparency largely caused by problems in tax policy and administration. Corruption and incompetence are largely to blame for this. On top of all this, the government has failed to invest adequately in public infrastructure which constrains the potential for sustainable growth. If Pakistan is serious about envisaging a different future, it must deliberate a realistic plan of action that will generate growth as opposed to stifling it. *