Daily Times

The government seems surprised by the sudden contraction in Foreign Direct Investment (FDI) in the month of November, and rightly so. Even if monthly increases leading to October were rather small, the rising trend still gave the government something to write home about and the prime minister and his team could mention it every time they claimed that the economy had improved. Suddenly there was a net outflow in November to the tune of $16 million, which has left many in Islamabad scratching their heads. And while the uptrend could well resume next month, considering how it is whipsawing, and the government will no doubt investigate the reasons for the outflow, a far more urgent question is what to do to stabilise reserves in a way that the economy is not always dependent on foreign loans or investments.

That is where this government, just like all others before it, will confront the problem of extremely low tax collection and not-good-enough export earnings. Sure, there is a very welcome feel-good factor just when remittances surprise to the upside, just like they have been doing for the past few months, but such trends are always temporary and should never be counted on for too long. It is taxes and exports, at the end of the day, that determine the health of national reserves. And that is precisely where government after government has failed the Republic of Pakistan and all its people.

The simple fact is that these problems will not go away till, for one thing, the Federal Board of Revenue (FBR) is overhauled and, for another, the export industry is given a healthy dose of value addition. And both are long-term projects that have as yet not even begun. So, while this government has every right to try and reclaim stolen national wealth, and even badmouth everybody it has proof against, a far better use of its time is working on plans to make FBR less corrupt and more accountable and finding ways of upgrading the production machinery. The only credible route to self-sufficiency in the modern world is rock solid reserves. For when countries have to rely on other countries or lending institutions just for their day-to-day functioning, they compromise on both their international standing and their national prestige. The FDI contraction in November, though in no manner a welcome development, would still not have hurt as much if only our reserves were stronger. *