And fundamentals need to be addressed
While one may not agree with Ch Shujaat Hussain’s idea of convening an APC to discuss the state of the national economy many would share the PML-Q chief’s worries about what he calls the country’s economic frailty. Despite being in power for almost half a year, the PML-N government has failed to improve the fundamentals of the economy. A continuous decline in the par value of the rupee since June this year has led to a staggering rise in foreign debt. As Ishaq Dar told the NA, the public and publicly guaranteed foreign debt, including IMF, has increased by Rs403,064 million as a result of depreciation of the rupee since the present government took office. Prices of almost every commodity have shot up as the State Bank of Pakistan (SBP) got banknotes of Rs280.7 billion printed. At the end of November foreign exchange reserves held by the SBP declined to a dangerously low $3.4 billion, hitting the lowest level since November 2001 when they had been less than $3.5 billion. Loss of confidence in Pakistani currency has further increased the pace of dollarization. With power and gas shortages continuing, and law and order yet to be brought under control the pace of investment remains unsatisfactory. The figures released by the SBP on December 17 indicate a slump in foreign investment, showing net decline of 17 per cent during the first five months of the current fiscal year. Foreign investment fell to $399 million as compared to $456 million in the same period of the previous fiscal year. During July-November services trade posted over $1 billion deficit mainly due to massive decline in exports.
While the release of IMF tranche of about $544.5 million provides the government some breathing space the overall health of the economy needs urgent attention. As an IMF official put it, overall vulnerabilities remain high and it would be crucial to consolidate the fiscal adjustment, boost external buffers, and deepen structural reforms. The country needs a more ambitious approach to improve tax administration and plug tax loopholes. An entire category of people living in palatial houses, owning several costly cars and frequently traveling abroad but not paying taxes has to brought the under tax net.
Pakistan badly needs to improve ties with neighbors to enhance mutual trade and concretise the dream of the Central Asia to India trade-cum–energy corridor. Peace in the region would also help reduce defence budget. For this the entire gamut of foreign policy decisions needs to be brought under the purview of the civilian government. No institution other than parliament should be authorized to define what constitutes national interest. Trade with India and gas and power from Iran and Central Asia are the key elements in dealing with some of the major economic woes and bringing prosperity to the region.
