- Measures aplenty needed to make this last
The decrease in the current account deficit is good news for the government, but while it has been quick to share the news with the IMF mission currently in Pakistan to negotiate a new package, it has still not got the country out of the foreign exchange crisis it is presently in. Most worryingly, both for the economic team that has taken over and the IMF, which had imposed it as a conditionality, the massive devaluation of the rupee, of 33 per cent since last July. While some aspects of foreign trade may show that that devaluation has begun to work, as there has been a marginal increase in exports, and a 7.87 per cent decrease in imports, the devaluations have not really worked. The figures that have come in do not reflect a positive trend, as a blip in a negative.
The real source of improvement has been in foreign remittances, which have increased about $1 billion in July-December. While this might feed into the PTI narrative of people trusting Imran Khan, it is not explained by the devaluation, unless one is to accept the rather convoluted argument that overseas Pakistanis have sent home foreign currencies to benefit from a depreciating rupee. The government may claim before the IMF team that its measures need time to be allowed to work, but the measures taken in addition to the devaluation, like various regulatory duties on luxury items, and the ban on furnace oil, will not bring the radical turnaround needed to make sure that Pakistan’s foreign exchange position is put on an even keel.
For that, the economy as a whole needs to be put on an even keel, and for that fundamental reforms are needed. The government needs to shift its present emphasis, one which despite a few cosmetic measures continues to be on extracting resources for the elite, to one of fairness, making sure taxes are paid by those on whom they are levied, broadening the tax net and ensuring that exemptions go to the deserving, not the powerful. If the government were to undertake measures which led to this, it would find that it was no longer obliged to go out into the world, cap in hand, asking for the means of subsistence.