THE numbers tell a harrowing tale that no amount of spin can hide. Revenues and exports have been flat for the first nine and 10 months of the fiscal year respectively. Even though imports are shrinking and bringing down the overall current account deficit, there are indications that this is happening more as a consequence of the overall slowdown of the economy than any government initiative. Ordinary people do not need any reminding that inflation is rising sharply, and from the looks of it, the situation is even worse in the rural areas where the costs of agricultural inputs are skyrocketing. What the latest round of data released simultaneously by the State Bank and the finance ministry tells us is that there is more to come.
The data shows that the fiscal deficit has come in at 5pc of GDP in the first nine months of the financial year, the highest it has been in well over a decade. This puts the government in the unenviable position of having to announce huge tax hikes at a time when the economy is reeling from massive devaluation and a sharp interest rate hike. This is the price of indecision. For all these nine months, the PTI leadership spoke of having inherited a crisis, but did little to manage it. The prime minister, perhaps inadvertently, ended up conveying to global audiences that there were challenges to investing in Pakistan because of the culture of corruption that he now intended to change. To draw the attention of foreign investors to Pakistan, a more restrained approach would help. FDI, meanwhile, is down by almost 50pc.
Of course, much of this is cyclical. Every incoming government in Pakistan has found an economy plagued with massive imbalances requiring emergency support from the IMF. And they have all begun their terms with an IMF programme, while repeating the words ‘we inherited a broken economy’. But having done so, they have all been required to take decisive action, as the short-term impact is to stifle growth while laying the groundwork for a revival in the medium term. Of course, they have all failed to implement the long-term structural reforms that are necessary to make this growth sustainable, which is the reason we keep finding ourselves returning to this place over and over again. The present government has been indecisive from the start, and having delayed the inevitable for so long, it is now in the peculiar position of having to make a new beginning nine months into its term. Nevertheless, now that the difficult decisions are finally being made, and the bitter medicine is being served, the government must show its resolve. If it fails to own the decisions being made by its new, technocratic team, the numbers could tell an even more dismal tale down the road.
Published in Dawn, May 23rd, 2019