No sound strategy in place
At a whopping $12.1 billion Pakistan’s current account deficit is now double what it was last fiscal year which translates into 4% of GDP. Although an increase was expected in the number due to CPEC imports from China, the number was still on the higher side as remittances fell by 3.1% to $19.3 billion in fiscal year 2017 (FY17) and exports were down 3.13% for the past eleven months.
Our staggering debt numbers don’t help things either. This government in order to finance the huge deficit has been borrowing heavily from foreign and local donors since it came to power. The external debt now stands at $58 billion with the domestic debt at Rs12.95 trillion.
Yesterday the Senate Standing Committee on Finance grilled the finance ministry for a strategy on how it plans to pay the creditors back to which Secretary Finance Shahid Mahmood provided two unviable sources of revenue generation currently available to Pakistan: tax revenue and workers remittances.
The FBR has missed its Rs3.5 trillion revenue target by Rs100 billion for FY17 and workers remittances are at record lows so not much reliance can be placed on the two. Then there is FDI and exports where the situation is even murkier. FDI increased by 4.6% to $ 2.4 billion in FY17 but half of that is on the back of CPEC.
Exports continue to fall despite the much touted Rs180 billion export support package announced at the start of the year which has had a negligible effect on demand for Pakistani goods abroad. The recent depreciation in the rupee is being validated as a well thought out plan to increase exports but a weaker rupee means a higher import bill which does nothing to bring down the balance of trade deficit.
In the absence of long term strategic planning to improve/reform current and add new revenue streams we will remain in the negative and it will keep getting worse. Simply piling on debt at undisclosed interest rates while hoping that remittances increase is not a strategy it is a death wish.
