Daily Times

If the 133 percent year-on-year increase in the trade deficit in August hasn’t got alarm bells ringing in the finance ministry and the prime minister’s office, then there’s a very serious risk that this trend will go unaddressed and the country will sleepwalk into yet another Balance of Payments (BoP) crisis. This year’s budget is counting on export earnings and revenue collection to do the job and make the IMF agree with the fiscal and monetary expansion even though it contradicts its own structural adjustment mantra very strongly. But if the first two months of the present fiscal year have seen year-on-year imports balloon by 70 percent, with exports not only not picking up but looking like losing steam, then we might have a current account disaster as well as an unhappy IMF on our hands. It’s not right for the government to blame international commodity prices and machinery import for production for the higher import bill at this point. For surely it had taken all this into account before signing off on the revolutionary budget. It would also have known that sometime this year international travel would pick up and overseas Pakistanis will have other things to do with their incomes than send them all home, so the welcome bulge in remittances is also expected to plateau sooner rather than later. How, then, will we make the budget work? It’s laden with subsidies and tax breaks yet the avenues of funding that expansion, exports and taxes, are severely compromised. That leaves us to borrow yet more to keep the budget on track; which is another way of saying that we would have to borrow more to keep the IMF bailout program on track, which also involves borrowing more to pay back money that had been borrowed before. All that is bound to shatter whatever investor confidence is left and punish the Pakistani rupee even more. It does not suit the government to celebrate its economic policy just yet. It must first do something about all the potholes that lie on the road to growth. Surely no plan would look too good, however ambitious it is, if it is unable to overcome the initial bumps on the way. Hopefully the government is aware of the gravity of the situation and has a Plan B ready just in case the IMF is not too impressed by the way things are going so far; which is very likely. Otherwise the experiment with the budget will meet a very unpleasant and quick end. *