THIS refers to the article ‘An economic collapse?’ (Jan 14), which highlighted Pakistan’s long-standing structural issues. Although the theme was fine, the more relevant time point would have been 1999, 2008 or 2018, when Pakistan was almost on the brink of bankruptcy.
What the current government inherited was a bankrupt economy with a very large current account deficit, stationary remittances, looming debt payments and, above all, FATF grey list with a threat of getting blacklisted.
The said article rightly built the scenario in case there was a ‘no’ from the creditors. Actually, this was the situation the government faced when it came to power. It had no choice but to go to the IMF with tough conditionalities in order to stabilise the economy. Additionally, the country had been put on FATF grey list, requiring us to make difficult decisions. In this backdrop, there was a general flight of capital. As the government was trying to stabilise the economy in 2019-20, it faced the Covid pandemic. The government handled the pandemic exceptionally well, which was also recognised internationally.
Not only a large rescue plan was introduced to handle the effects of Covid, the government kept investing in agriculture, exports and housing sectors to mitigate the negative fallout of the pandemic. This helped the economy to rebound with a four per cent GDP growth.
The latest budget was premised on inclusive and sustainable growth. The incentives in the budget started showing promising results, with growth in revenue collection, agriculture, exports, remittances, large-scale manufacturing and power consumption. This was good news till the commodity cycle hit the country along with the Afghanistan crisis. Prices of imported commodities went up, pushing higher the trade deficit and inflation.
However, growth of 4.5pc to 5pc is being witnessed in the economy during this year despite the headwinds, and with the international commodity prices likely to come down in the next 3-6 months, Pakistan will experience an inclusive and sustainable growth, and not an economic collapse.
Ministry of Finance
Published in Dawn, January 19th, 2022