A hard fight from here


There’s definitely some hard juggling ahead for the government. Granted, deficits are a difficult topic in election year, but they are in serious red even prior to election excesses, and hopefully someone in Islamabad will take serious note of it. It is a matter of serious concern that official borrowing to fund the deficit has sky rocketed just when tax collection improved 28 per cent year-on-year. While some of it owes to unexpected energy subsidies, coupled with substantial closure of aid inflows, much is also lost to inefficiency, corruption and political manipulation – the PSE drain being the classic case in point. From here, it will take a hard fight to keep above IMF’s forecast of a seven per cent deficit. In what little remains of the current fiscal, aid is unlikely to resume, private sector crowding out will not be addressed, and the privatisation program is just too far from providing any relief. To make matters worse, not only is the government borrowing heavily from commercial banks, it is also pressuring central bank printing presses to run overtime. Sooner or later, this will bring the inflation genie to life. And with little likelihood of Islamabad’s addiction to debt subsiding by then, there will be no meaningful private sector expansion, and subsequent employment generation, to counter the CPI hike. Should the price spiral coincide with the vote, there will be little for Islamabad to do but prepare for change of guard, and leave the fortress in shambles for the next administration. Over the last few years, ours has been among the least resilient of Asia’s economies, most of whom led the initial 2009-10 bottoming out of the international recession. That is because we have paid little attention to the most basic, and obvious, problems – leakages, corruption, mismanagement, excessive borrowing.