With no unqualified successes, the Pakistan Economic Survey 2022-23 largely dwells on the oft-repeated causes of the economy’s slide and reasons for unabated macroeconomic imbalances.

With sound public policies and strategies, successful leaders deliver and do not try to politically survive on a narrative of the challenges they encounter in promoting the public good. It is the failure of public policies that create polycrisis.

While one may concede that shedding the historical baggage is a long-term haul, policy initiatives that could reset the economy’s direction are not visible. An analyst says, ‘we blame everyone but ourselves’ for the continuing dismal performance. The much-needed self-appraisal is missing.

The Economic Survey acknowledges that due to the “hard decision of import comprehension”, the current account deficit fell 74.1 per cent to $3.4 billion (in the first nine months of FY23) and provided space to avoid a sovereign default. The deficit was $13bn in the year-ago period.

Lacking not only foresight but also hindsight, public policy trails behind events instead of shaping them

It is business as usual in the nature of fire-fighting marked by the absence of any strategy to shore up falling export earnings and worker remittances or undertaking import substitution.

Exports declined by 9.9pc during July-March to $21bn compared to $23bn in the same period last year. Simultaneously, remittances decreased from 10.8pc to $20bn, down from $23bn. Imports fell 25.7pc to $43.7bn from $58.9bn, primarily because of policy tightening and other administrative measures. As a result, the country’s trade deficit significantly shrank to 6pc of GDP, compared to 10.4pc from last year.

However, the external sector pressures continue unabated, with an import-oriented, foreign debt-driven GDP growth hitting a saturation point, as evident from donor fatigue and shortfall in estimated debt inflows. And the more the political economy sinks into a quagmire, the more it creates divergence of views between Islamabad and the International Monetary Fund (IMF).

Analysts point out that successive governments have failed to address structural reforms in taxation, energy, state-owned enterprises and expenditure management.

By and large public policy has lacked not only foresight but also hindsight. It trails behind events instead of shaping them because it remains largely reactive rather than proactive and regressive rather than progressive.

Policymakers seem to be oblivious to changing ground realities as reflected in dismal economic performance versus the overambitious targets set for FY23.

High inflation has become a permanent feature where the economy is growing or shrinking, whether the demand goes up or is sought to be depressed by monetary policies.

By changing the path of economic recovery, the poverty rate can be reduced to 15pc from 40pc

Inflation was officially recorded at 28.2pc for 11 months of FY23, against 11pc in the same period last year and the annual official target of 11.5pc because of a sharp depreciation of the rupee and global supply shocks, resulting in costly imports, says the Economic Survey document.

Among other factors, the Survey concedes that lingering political instability, import controls and tight monetary policies caused the country’s prevailing economic downfall. Finance Minister Ishaq Dar says the devaluation of the rupee is the mother of all economic problems.

In FY23, the economy grew by 0.29pc against the projected growth of 5pc, owing to lower than estimated growth in the three broad segments of the economy.

The actual performance against targets (in bracket) are as follows: agricultural growth by 1.5pc (3.9pc), services by 0.9pc (5.1pc ) and industry contracted by 2.4pc (5.9pc). Super floods have undoubtedly contributed to the economy’s slowing down, disturbing supply chains and causing immense damage to crops and livestock. And it may be noted here that addressing stagflation is far more challenging than the usual cyclic crisis.

In the case of doing business as usual (without reforms), the economic growth would be 3.5pc even after 12 years, Federal Minister Planning Ahsan Iqbal told newsmen after the National Economic Council (NEC) meeting on June 6.

Finance Minister Dar says his topmost priority at this stage is to ensure macroeconomic stability. And the 5Es framework focusing on exports, equity, empowerment, environment and energy — the driving areas — will be part of the roadmap for the next year.

The NEC approved the underlying concept of Pakistan Vision 2035 while calling for immediate preparation of a transformation plan with a focus on five 5Es. The concept paper expects economic growth to increase at an annual average of around 6pc up to 2035, with growth acceleration in all sectors. By changing the path of economic recovery, the unemployment rate can be reduced from 9pc to 5pc and the poverty rate to 15pc from 40pc.

To achieve sustained high economic growth over a significant period lasting at least two decades, Pakistan must allocate more resources for developing human capital and adopt productivity-enhancing measures, says Mr Iqbal. But in the past, all long-term plans have been shelved and replaced by three-year IMF stabilisation programmes.

Published in Dawn, The Business and Finance Weekly, June 12th, 2023

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