Unless this is done it might be difficult to stop the rot
Days after the IMF’s executive board concluded Article-IV consultations with Pakistan, it released a communiqué that needs to be taken into account. To start with the document points out that the picture of Pakistan’s economy is not as charming as seen from Finance Minister Ishaq Dar’s rose coloured glasses. The Fund noted that Pakistan outlook was ‘favourable’, and then continued to enumerate the risks the economy faced. It also corrected some of the figures presented in the National Assembly by the Finance Minister last week. For instance the government’s debt is equal to 66.6% of GDP, significantly higher than 59.3% the finance minister claimed. Similarly the IMF put Pakistan’s debt at over Rs21.2 trillion while Dar claimed it was Rs18.9 trillion.
The major black spot was the macroeconomic situation. The macroeconomic stability gains have started to erode and could pose risks to the economic outlook. Key external risks include lower trading partner growth, tighter international financial conditions, a faster rise in international oil prices, and failure to generate sufficient exports to meet rising external obligations from large-scale foreign-financed investments from China in CPEC. Generally, Government debt as a percent of GDP is used by investors to measure a country’s ability to make future payments on its debt, thus affecting the country’s borrowing costs and government bond yields.
According to the communiqué policy implementation in Pakistan has “weakened recently and macroeconomic vulnerabilities are re-emerging.” One of the reasons behind this are political exigencies. The government continues to keep large section of retailers out of the tax net. Similarly it has failed to privatise some the big public sector enterprises that continue to haemorrhage the economy. . Bad governance continues to lead to failure to recover payables in power sector and to reduce line losses significantly. At a time, when the government should have paid attention to the economy it t is under attack from the opposition, thanks the financial shenanigans of its leadership.
