Unheeded warnings

• Latest IMF review of Pakistan’s economic red flags

‘The more things change, the more they stay the same’, is essentially a political statement about underlying fundamental continuity even in ostensibly differing political systems, but it can well be applied to the current state of Pakistan’s economy. Various governments have more or less faced the same chronic financial problems since 2000, whose adverse impact has increased manifold, and almost reached the point of unsustainability, after years of half-hearted and short-term measures. Only an army of adjectives can do justice to the condition of the national economy: dismal, perilous, dangerous, unstable, bleak and depressing, with little or no chance of a change for the better. A brand new, generous Amnesty Scheme, this time to whiten foreign assets has been lined up, but as for the desperately needed basic reforms and structural changes to resuscitate the gasping key indicators, nothing, despite repeated advice by international donors. The absurdity is that the finance minister, facing corruption charges, has absconded to London (on medical leave), and his successor has not been named by a leadership mired in legal wrangling. The decisive political will and drive, as usual, is conspicuous by its absence.

The IMF’S executive board meeting on March 5 has for the umpteenth time cited the familiar list of dangers threatening the country’s economy: macroeconomic weakness and instability, widening external and current account deficits, inadequate forex reserves, fiscal indiscipline, aggressive foreign borrowing, public sector white elephants, record imports and abysmal tax revenue. The country’s fiscal deficit is particularly disturbing, at 5.5 percent of GDP or Rs505 billion, and current account at 4.8 percent of GDP. Though GDP growth is estimated at 5.6 percent in 2017-18, agricultural sector has rebounded and inflation contained at 5.4 percent, macroeconomic imbalances could mar short-term growth prospects. The IMF recipe for success is also well-known: additional revenue collection, accelerating structural reform, exchange flexibility, and prudent borrowing. Their counsel needs urgent addressing as, with rising oil prices, negative consequences of being grey listed by the Financial Action Task Force, and US aid cutoff, Pakistan would likely soon be knocking at its door. It should be prepared for a hard bargain and even tougher conditions.