A severe liquidity crunch


It is noted with deep concern that despite appeals from all quarters, the government is just unwilling step out of the money market, resulting in a severe liquidity crunch that continues to compromise all efforts at stimulating growth. At present, with central bank printing presses still in overdrive, and the rupee at its weakest, and exports nowhere near requisite levels to leverage currency depreciation, there is practically no way the easing monetary environment can have any positive effect save inducing increased central borrowing.
It bears noting that Islamabad’s recent ‘no’ to the Fund raised hopes of focusing on indigenous growth, aimed at increased productivity, revenue collection and exports to move forward. Yet within weeks it is apparent that the government has no intention of freeing bank credit to induce private sector investment. Also, with reports of finance ministry officials visiting IMF offices again, it is becoming clear that tax revenues cannot be raised in time, nor exports enhanced enough to grow on our own.
So long as liquidity is scarce, economic activity will remain stagnant. Inability to manage growth and ease employment, at a time when official policy is too weak to preempt food inflation, is a sure recipe for disaster. The last thing Pakistan needs is frustrated masses taking to the streets to make the government realise where its priorities should lie. Much of its borrowings fund non-productive expenditure. At a time when it should effectively be in election-mode, its disregard for people’s most basic concerns is startling. Now, there is hardly any time for policy turns anymore. It seems the fiscal’s end will bring the same scenario of budget targets falling horribly short. The people need change. If it will not be delivered at policy level, then it will be made to come at the government level.