- Regional peace vital for economic development
Talking to a group of businessmen the PM said his government had succeeded in overcoming the daunting task of stabilising the economy. Henceforth it would focus on the promotion of economic growth. But has the economy really stabilised?
Three roadblocks still stand in the way I.e., the balance of payments, fiscal deficit and the skyrocketing debt.
The immediate balance of payments situation is under control through Saudi, Emirati and Chinese loans. But Imran Khan’s long term assessment is based on hope rather than capacity. Access to the Chinese markets is expected to double Pakistan’s exports in the current fiscal year. Reliance on a single factor to provide a long-term solution to the balance of payments issue is a risky affair.
The growth in exports remains less than desirable. Last year’s $37.6-billion trade deficit cannot be met by an unrealistic $25b export target. The deficit only marginally contracted to $14.5 billion in first five months of the current year after the growth in exports tapered off.
The government anticipates fiscal deficit for the current fiscal year to reach 6.3 per cent of GDP missing the 5.1pc target set in September last year. Slippages on the fiscal front emerged from both revenue collection and expenditure overrun. With rising tensions on the border, the defence spending is bound to increase considerably.
The government expects 2019 to be the year for foreign investments in Pakistan. As things stand the FDI is down 17pc compared to the last fiscal. The debt is increasing at a phenomenal speed. The June Rs30,000 billion figure shot up to Rs33,238 billion till Dec 2018, an increase of over Rs3,200 billion in just six months.
There are warnings galore. Fitch Solutions last month predicted country’s GDP growth rate will plunge to 4.4 per cent amid the two widening deficits. Questioning the economic fundamentals over the next two years, Standard & Poor last month downgraded Pakistan’s long-term credit rating to ‘B-Negative’ from ‘B’. “Pakistan’s economic outlook, as well as its external position, have deteriorated well beyond our previous expectations,” said the rating agency, adding that it has lowered the long-term issue rating on unsecured debt and Sukuk bond to ‘B-’ from ‘B’. Economic growth is nowhere in sight.