Daily Times

Pakistan faces challenges of a growing debt burden, fiscal deficit, trade deficit, and current account deficit, which are not of any less importance than the threats to internal and external security.In fact, since Pakistan joined defence pacts with the West and bilateral agreements with the US, Pakistan became dependent on aid and grants from them. And it was because of this dependency syndrome that our rulers had to advance American interests rather than our own national interests. Politicians, till recently, thought that they could stay in power with the support of the sole superpower.They often complained to the US leadership that the military does not allow them to pursue a policy of peace with the neighbours, which is corroborated by the ‘Memogate’ scandal and the ‘Dawn Leaks’. Secondly, due to the dismal economic situation, Pakistan needed IMF loans — requiring a nod from the US — and bargained away its sovereignty.

If urgent steps are not taken to address the situation, Pakistan can default on IMF and foreign loans. Certainly, the time has come for the political hierarchies ruling at the centre and in the provinces to study their actions pervasively: for the cause they are presently championing so fervently, and the fracas they are waging so stridently,is enthusing no one on the street. None of the governments, incumbent or past ones,brought happiness or benefit to the depressed lives of ordinary Pakistanis. More than four years down the line, the ruling party still has to show some reforms to pull up the sagging economy; to provide jobs to the unemployed, and allocate adequate funds for social sector.In fact, the government has not been able to achieve any of its economic targets. Remember that a strong economy is sine qua non for strong defence.

The problem is that for too long, Pakistan has been earning less and spending more, resulting in the fiscal deficit. Pakistan has also been importing more and exporting less, leading to the trade deficit and the current account deficit. The nation has been listening to the empty rhetoric and dubious claims of Finance Minister Ishaq Dar about economic growth of 5.3 percent and highest-ever foreign exchange reserves. Last month, he expressed concerns over the declining rupee value against the dollar; the phenomena was but natural. When Pakistan’s import bill is about $52 billon and its exports register at $20 billion, demand for the dollar increased, and the rupee’s value declined.It is as simple as that. Anyhow, the claim about robust economic growth is reflected in the realm of increases neither in production, nor exports,nor in job opportunities. In fact, Pakistan’s trade deficit has ballooned to an all-time high of $32 billion for 2016-17.

Unprecedented national debt — which now stands at Rs. 18 trillion — limits the capacity to build a strong defensive capability, and also limits fiscal space to invest in human development and infrastructure

After remittances from expatriate Pakistanis to the tune of around $20 billion, the current account deficit is $12 billion. It is unfortunate that despite the fall in oil prices in the international market, the gap between imports and exports continued to increase during the last four years. Exports have in fact declined from $24 billion to $20 billion during the last four years; and the fresh statistics have caused concerns about long-term sustainability of the external sector. Due to the swelling trade deficit, Pakistan’s balance of payments is now projected the worst it has ever been. The Finance Ministry, in its budget documents, revised the current account deficit projection to $8.4 billion for the year ending 2016-17 fiscal year; but it turned out to be $12 billion, which is the highest-ever in the history of Pakistan.

If this trend continues, it could virtually erode the much-touted forex reserves within the next 6 months. Independent economists say that the volume of the trade deficit has finally exposed the vulnerabilities of Pakistan’s economy.

Despite incentives offered by the government, exports are not increasing. One cannot understand why the IMF and other financial institutions have been painting a rosy picture about Pakistan’s economy when it failed to meet targets.Despite a decline in exports and in expatriates’ remittances — and a debt mountain of Rs. 18 trillion, which includes foreign debt of $72 billion — Finance Minister Ishaq Dar was upbeat, and presaged that by 2050, Pakistan would become the 18th largest economy the world. This appears to be a funniest statement, as present level of debt is not manageable, and even a bailout package from the IMF cannot salvage the situation.

Pakistan will have to fall back on the IMF and other international finance institutions, and will have to accept the conditionalities attached with the loans which are, more often than not, against the national interest. Of course, Pakistan’s major problem is growing public debt, as debt services — loan instalments and interest — would consume about 33 percent of federal revenue. Unprecedented growing public debt, on one hand, limits the capacity to build a strong defensive capability, and on the other hand,limits fiscal space to invest in human development and infrastructure.Political hierarchies need to take serious notice of the people’s anger;they must set about earnestly tackling the underlying causes of public disgust and frustration, and attend to the greater satisfaction of the masses. They want economic opportunities, jobs, and livelihoods so as to see some respite in their miserable lives. They are distraught and depressed, while the leadership is in a joyful binge.

The writer is a freelance columnist. He can be reached at mjamil1938@hotmail.com

Published in Daily Times, September 10^th 2017.