A FIRST reading of the Pakistan Economic Survey 2021-22 reveals just how deep the impact has been on the country’s economy of the Russia-Ukraine conflict. Without it, the conversation around Pakistan’s challenges in the next fiscal year would decidedly have been very different.

The survey report, which documents the state of the economy up till roughly the same point as when the PTI government was pushed out, shows that the economy had continued on its path to a robust recovery from the days of the Covid-19 pandemic.

GDP growth actually exceeded the PTI government’s set target of 4.8 per cent by registering at 5.97pc, helped by low interest rates and an expansive fiscal policy, growth in manufacturing and improved production of crops (apart from wheat). However, as the incumbent finance minister put it, this growth was ‘unsustainable’ as it had worsened the underlying imbalances in the economy by considerably heating it up.

Read: Import bill surges on higher global commodity prices

Before the Ukraine crisis overshadowed everything, the government had started to feel the impact of inflation triggered by excess demand. Its decision to subsidise petrol and electricity and remove the petroleum levy and sales tax on POL products, “posed significant risks to fiscal sustainability in an already constrained fiscal environment”. Savings and investment also remained low, while economic conditions were unable to attract either domestic or foreign direct investment in the economy.

It is commendable that the report, released under the PML-N, maintains objectivity and apportions praise where it is due. This is quite positive, because if there is ever to be a ‘charter of economy’, it will have to start with rival parties at least acknowledging each other’s efforts and achievements instead of trying to constantly undermine each other.

The survey’s findings make it clear that it will not be in any party’s control to set a firm direction for the economy for at least the next year. The document notes that the “surge in commodity prices and the increase in global interest rates will further reduce fiscal space, especially for oil and food-importing economies,” of which Pakistan is one.

Read more: No relief for consumers expected in budget

The explosive expansion in the country’s trade deficit and its subsequent impact on the current account has already wreaked much havoc. Considering that Pakistan will have to import considerable quantities of expensive wheat as well this year due to a smaller crop, risk exposure to global markets will remain elevated. Inflation fuelled by higher prices of electricity and gas and global supply-side shocks in fuel and commodity prices will pummel the economy for months.

As the document notes, domestic instability is only exacerbating the crisis. If they cannot work together, political parties must at least exercise some restraint and allow for a needed economic correction to proceed unhindered. The times ahead are tough, and parties must show a greater sense of responsibility than is currently on display.

Published in Dawn, June 10th, 2022