Pakistan’s merchandise exports totalled $17.08 billion in the first nine months of this fiscal year. Overseas Pakistanis sent home $16.1bn in the same period.

Add the two numbers and you get $33.18bn. Now look at the July-March merchandise import bill, which was $40.75bn. The situation is alarming: there is a huge gap of $7.57bn.

The bottom line is that even if we continue to finance our imports through exports and remittances, we will continue running a deficit. That deficit can expand further at the end of the fiscal year if imports do not fall dramatically and exports and remittances fail to grow at exceptionally high rates. These ifs are too difficult to ignore.

The deceleration in imports witnessed in the last nine months — 7.96 per cent year-on-year — is a healthy development. But this alone is not going to make a decisive impact on our external sector because growth in exports, which is just 0.1pc year-on-year, is not helping. The rise in remittances — which is still 8.74pc despite some deceleration — is just fine. But the declining rate of growth in remittances means shrinking volumetric gains. That, too, is unhelpful in fixing our external-sector issues.

Now look at the exports and imports of services. Here too, imports are declining, providing some relief to foreign exchange management. But services exports are also falling, making it a bit difficult to make some huge foreign exchange saving. In the first eight months of this fiscal year, we had a trade deficit in services amounting to $2.3bn — down more than one-third from a year ago. But the volumetric gain is just $1.32bn.

We have already started implementing some of the structural reforms before the formal signing of the deal with the IMF

We keep talking about foreign direct investment (FDI). But in the first eight months of the fiscal year, FDI came down to $1.62bn from $2.09bn. Portfolio investment remained negative just like in the comparable period a year ago. But net outflows in July-February were far larger — $408m against $119m.

Issues look all the more challenging when we take into account the outflow of foreign exchange through the repatriation of profits and dividends as well as the payments that Pakistani citizens make overseas to cover education fees and medical bills of their kids and loved ones. All that at a time when the foreign exchange reserves of our central bank — $10.27bn on April 5 — are not enough to cover even two and a half months of the import bill.

This is going to keep the exchange rate under pressure for some time even though the rupee has already lost about 33pc value against the dollar since December 2017. Import-curtailing measures are paying dividends, but they will take a few years to make a full impact. The tightening of rules of business for foreign exchange companies and making outward flows of dollars through banks more transparent will also be helpful to a limited extent.

What should we expect in the future then? Are problems of the external sector going to be fixed soon? Finance Minister Asad Umar says it will take a year and a half. Sadly, he is right. A year and a half seem to be the shortest possible time for repairing the economy. In the first eight months of 2018-19, we had a current account deficit of $8.84bn, down from $11.42bn in the year-ago period. Still it was large enough to give us a headache.

Whether it is going to be our last IMF programme or the first of a new series, the fact is that we have returned to the IMF for a balance-of-payments support package. We have already started implementing some of the structural reforms before the formal signing of the deal. Most happenings on the economic front directly or indirectly reflect this fact.

Tax concessions on agricultural and industrial inputs are being revisited. Energy subsidies are being withdrawn. The rupee has been depreciated. The central bank is making sure it does not emerge as a net foreign exchange lender in the interbank market. Interest rates are being tightened. The effort to collect more taxes is underway. A crackdown has been launched against big and powerful electricity and gas thieves, including businesses and industries. The stage is being set for revitalising state-owned enterprises, leading to painful layoffs in a number of cases. The list goes on and on.

Most of what is being done has a valid reason. In fact, some of the things were overdue. But the issue is that all these things are happening at a time when economic growth is faltering. The IMF has warned that our GDP could grow as little as just 2.5pc during this fiscal year. Reforming too much at a time of slower economic growth — and that too amidst growing political confrontation — is always painful. It adds to the miseries of the common man — at least in the medium term.

Realising this, the PTI government is rolling out pro-poor schemes for political survival. Opposition parties poke fun at it, citing galloping inflation and empty state coffers as proof of the poor handling of the economy. They are even threatening to topple the government. Headline inflation is already heading towards double digits. Development expenses in the first nine months of this fiscal year have fallen 26pc to Rs449bn from Rs607bn in the year-ago period.

To add insult to injury, the business community is demanding that the government should rein in FIA and NAB. It is accusing both of ‘harassment’. The PTI leadership insists that state institutions are going after only those politicians and businessmen who are involved in money laundering and tax evasion.

Published in Dawn, The Business and Finance Weekly, April 15th, 2019