Ignoring the external sector
Sections of the press have rightly raised the prospect of a looming external sector nightmare not too far down the road, putting Dar sb’s rosy ‘growth and reserves’ story at grave risk. With exports showing no signs of life anytime in the foreseeable future, and FDI also weakening over time, a significant decline in remittances may just prove to be the last nail in the external account coffin. Remittance numbers for July, down 20 percent year-on-year, would have sent shivers down some spines in the finance ministry, but only if someone were paying attention.
The response, so far, has been typical – wishing away the troubles by making excuses for their occurring in the first place. First was the Eid excuse; citing supposed cyclical trends. But why has such a trend never existed before then, as already questioned in the press? Then there is the Brexit argument. The pound took such an obvious pounding – and a big dip did come from the UK – that our whole remittance structure was altered. But, again, why have sudden movements – aplenty in the sterling since the ’08 recession days – not hurt our foreign account before?
And, quite obviously, this is a far bigger trend than just peripheral Europe. Numbers from the Gulf are also hurting, owing to both financial and political reasons; with the uncertainty likely to last considering how unpredictable the Middle East has become. Now, with the kitty drying, the government will, sooner or later, turn to more foreign funding to run its affairs; and the debt will continue to mount. At the moment, there’s little but CPEC to cause some optimism as far as the government’s finances are concerned. But if the external account gives way some more, which is very likely, the government will not have an economy to sell at the next general election.
