Time to heed warning signs

Urgent economic action by government essential

Adding to the long list of tales of the country’s woeful economic condition was a recent report that the World Bank (WB) had rejected a policy -loan request of the Government of Pakistan (GOP) by linking it to readjustment of the official exchange rate. This was something serious, as the WB loans, channelled through the International Bank for Reconstruction and Development (IBRD) and International Development Association are meant for poverty alleviation and at concessionary rates. The report was flatly denied by a Finance Ministry spokesman, who in the usual bureaucratic jargon meant to conceal rather than convey thought, riposted that GOP and the WB ‘remain engaged on an ongoing basis on various projects and programmes’ that no policy-based loan was requested and hence turned down this fiscal year. That is all to the good, but the truth cannot be hid that the national economy is akin to an exhausted man who, while not actually drowning, is barely managing to keep his head above water.

It is also true that IBRD lending support is lost if a country’s forex reserves fall below the equivalent of its three month import bill, and Pakistan is hovering close to the danger mark. A news item puts the reserves at $14.398 billion, which covers just 3.2 months of imports, but international donors deduct $3.9 billion of short-term loans guzzled by the government, which leave the net forex reserves tottering at $10.4 billion. To compound the nightmare scenario, imports are hitting record highs, the import bill for May-July 2017 alone amounted to $14.5 billion, while numerous due short-term loans at high rates constitute another threat. So, the spokesman of the Finance Ministry to the rescue again! The bright side is that exports are up 10.5 percent in July 2017, inward remittances also show a 16 percent increase in the same month, while regulatory duty imposed on non-essential imports in Finance Bill 2017, among other steps, will further buttress forex reserves. But reality wins over rhetoric every time, and reality lies in the IMF embrace. Again.