Daily Times

With the start of 2023, analysts worry that Pakistan could default on its debt payments, wind up like Sri Lanka, remain low on foreign reserves, and stuck with unmanageable, spiralling inflation. The year ended with a bleak economic picture, and the coalition administration has numerous economic issues ahead. The government must come candid and tell the people to get ready for an even more difficult year ahead than the one they just went through. Reason: no miracle is going to happen to break the current scenario. As of December 23, 2022, official reserves have further decreased to $5.8 billion. In the first week of January, once the $1 billion debt repayment is made, dreaded arithmetic comes to the fore. The government needs to arrange urgent cash to keep the kitty afloat.

Apart from political instability and poor economic policies by successive governments, Mother Nature also contributed to our economic woes: millions of people being made homeless by the floods dealt a serious blow to Pakistan’s already precarious macroeconomic environment. The National Disaster Management Authority has assessed the initial damages at above $30 billion. As a result, the SBP reduced its growth projections for the second half of fiscal 2023 (FY23) downward, expecting a GDP growth of close to 2% as opposed to the earlier estimate of three to 4%. The government wants to reduce the budget deficit from 7.9% of GDP in FY22 to 4.9% of GDP over the remaining fiscal year. This goal would be accomplished by combining revenue and expenditure initiatives.

Pakistan’s best bet is putting more stakes on agricultural productivity. This can only happen if the experts produce new seed varieties that are suited for changing weather conditions and create a framework that emphasises water management measures. We also need to make our industrial sector a highly technologically advanced industry. Then, the oft-repeated mantra: increase tax collection. In terms of the Federal Board of Revenue’s collection exceeding its five-month (July-November) targets for FY23, it is safe to say that FY23 has gotten off to a solid start. However, the international lender – International Monetary Fund – demands a higher recovery to keep the primary and fiscal deficits within allowable ranges because slippages on the expenditure front with regard to rehabilitation measures are likely to occur. The government is under pressure from the IMF to increase gas and electricity rates, reduce spending, and enact new levies. The scenario is a test case for Finance Minister Ishaq Dar who has run short of options. *