Positive Signs of Economic Revival

Author: Javed Iqbal

Efforts of the government for the revival of the economy are finally coming to fruition. The upgradation of Pakistan’s credit rating by Moody & Fitch was its endorsement. This positive development is further complemented by the completion of a $3 billion loan programme in April and the likely approval of the long-awaited IMF’s $7 billion Extended Fund Facility (EFF). IMF’s spokesperson, Julie Kozack, said that an executive board meeting is scheduled to take place on September 25 to discuss a $7 billion loan deal agreed with Pakistan.

In the current economic landscape, the IMF package was the only way forward to steer the country out of the economic quagmire. With the approval of the IMF package, the Pakistan government needs to persuade friendly countries to invest in Pakistan. The economic powerhouses Saudi Arabia, UAE and China have already signalled their intent for investment. Only foreign direct investment can help boost economic activity, creation of jobs, control price hikes and fulfilment of the country’s debt obligation.

The approval of the IMF package should be viewed as a double-edged sword.

An appraisal of economic policies shows that in July 2024, elevated workers’ remittance inflows and a substantial improvement in export earnings offset an increase in imports that helped contain the current account deficit to $0.2 billion. The inflation and confidence of businesses have shown an improvement in the latest pulse surveys. On the other hand, the continued ease in inflationary pressures and the unfolding impact of recent policy rate cuts have supported the growth prospects in the industry and services sectors.

The upward trends in workers’ remittances and export earnings are encouraging, but there is a need for sustainable economic growth driven by domestic production and innovation. The government must focus on creating an environment conducive to entrepreneurship and small business development, which can significantly contribute to job creation and economic diversification.

Additionally, the social implications of the IMF deal cannot be overlooked. Austerity measures and tax increases, while necessary for fiscal health, can disproportionately affect lower-income households.

In addition to the above Punjab government initiatives for the social uplift of deprived sections of society would provide much-needed relief.

The government must ensure that its economic policies are inclusive and that social safety nets are strengthened to protect the most vulnerable segments of society. Programs aimed at improving education, healthcare, and social welfare are essential to foster long-term stability and growth.

Securing the IMF package is crucial for stabilizing Pakistan’s economy, which has been mired in challenges. However, the approval of the IMF package should be viewed as a double-edged sword. While it provides necessary funding, it also comes with stringent conditions that demand comprehensive reforms. The government’s ability to implement these reforms effectively will be a litmus test of its commitment to economic recovery and governance.

The writer is a freelance columnist with special focus on issues concerning national security.