Daily Times

There is plenty of compulsive chatter about how the fate changing China-Pakistan Economic Corridor (CPEC) promises to be. That the mills will yarn once again, the cattle will be fragrant with fresh milk and the poor shall have their fortunes revived permanently. However, hold your horses, we are not out of the woods yet. Sharifs’ have picked up a knack of talking themselves out of an economic mishmash. Truth be told, Pakistan’s economic prospects at least for the immediate future remain fitfully shaky. Growth, for most part of Pakistan’s history has been infested by several missed opportunities. There are although plentiful reasons to lose one’s calm, but chief amongst them include a widening current account deficit and rapidly drying up foreign remittance inflows. As Sharifs’ go about riding the CPEC tide, a few bloomers on our macroeconomic front deserve a narrative: imports have been steadily rising and now approaching a near $50 billion mark. Sadly, exports are in a receding mode, declining from $25 billion in 2012 to a current $20 billion. That leaves us with a brain — busting $30 billion of current account deficit, far exceeding our present export earnings. Another reason to fluster about is a gradual drop in foreign remittance income.

Pakistan’s erratic macroeconomic state does not entirely borrow its behavior from its domestic policy frameworks. Being a fairly liberalised economy, its external environment is an equally noteworthy determinant of local macroeconomic performance. Incessant trade deficits over successive decades have not only weakened the rupee, but have also eroded domestic economic prospects. In a low savings economy such as that, choked by other structural impediments, foreign remittance inflows have played the role of a shock absorber. A traditional buffer that is usually greater than the aggregate sum of total external development assistance and even foreign direct investment. Since the New York twin towers ravaging of 9/11, these remittances have witnessed a steady increase, a major portion of which is extracted from the resource loaded gulf nations. Dismally, and owing to depressed global commodity prices, budgets of all major oil exporting kingdoms are sorely impaired, dampening the demand for cheap labor supply coming from Pakistan. As a result, since late last year, Pakistan has lost close to $200 million of such earnings, and, extended periods of poor remittance inrushforebode a serious macroeconomic distortion.

Give Pakistan’s fragile macroeconomic fundamentals, uncomfortable inflationary tendencies, mounting twin deficits, dwindling foreign exchange reserves and scanty domestic savings, the remittance income came as a refreshing insurance against, not only a bungled-up currency but also poor grass root credit constraints. A little fudging of the macroeconomic statistics, courtesy some Chinese loans cannot be misconstrued as an economic uplift. Sustained macroeconomic development after all, depends on how many people are pulled out from the breadline condition. According to the most updated United Nations Development Programme (UNDP) scoop, close to thirty percent of Pakistan’s population is on the breadline. This implies that a large section of the population is sorely undernourished and therefore have little access to other essential needs like clothing, shelter, education, health and sanitation. Grass root livelihood following the 2010 devastation caused by the floods and the unceasing conflict in the frontier region of the country, has been in tatters. As most emerging economies round the globe are increasingly turning inwards, investing heavily on shoring up its human and physical capital, Pakistan must toe the line. As remittance inpourings continue to dry, and more overseas Pakistanis uproot themselves from a better living abroad, the government must examine its alternatives to fetch the greenback and keep its reserves from dipping further. Pakistan’s growth however, expanded by 4.7 percent in the last financial year, a gain of 18 percent over 2015. But GDP numbers can always be convoluted and obscure. CPEC and the accompanying Chinese floaters may be a wonderful thing if utilised sanely but do not ensure that the nation’s vault is in fine feather. We are clearly not out of the woods yet. This reminds me of an opening extract from Charles Dicken’s A Tale of Two Cities: “It was the best of times, it was the worst of times.” Uncertainty looms large. The Sharifs must ensure that Pakistan does not scamper back to the International Monetary Fund (IMF) sweeteners at the end of another dodgy tenure.

The writer is an alumnus of the University of Cambridge and an economist. He previously worked as a journalist in London and also played forPakistan’s junior cricket team