Bleak economic performance

Economic Survey (ES) released by the Federal Government on 10 June depicted an all- round poor performance by economy during the outgoing fiscal year for multiple reasons of political uncertainty, challenges in the form of IDPs, rising prices of food, petrol and raw materials in international market, high domestic demand of consumable items, expansionary fiscal policy and lack of visionary management of economy during the past few years.
This has certainly increased stakes for the government. The government has missed virtually every main macro-economic target set in the budget 2008-09 for the outgoing fiscal. It has a difficult job of not only containing the slide down in economy but it has also to regain lost growth momentum and macro-economic stability within shortest possible time. The budget makers had a difficult task in this backdrop.
The country's debt has increased to over $51 billion by the end of this fiscal and total public debt has increased by Rs 1.367 trillion in the first 9 months of 2008-09 to Rs 7.3 trillion, up by 23.2 per cent in nominal terms. The country's debt, current account deficit, inflation and some other macro evils put the economy in danger zone.
Current account deficit problem can be best addressed by boosting exports that would be possible only if cost of inputs is decreased and there is value addition and political stability in the country. Current situation on both the accounts is difficult to address. Increase in prices in international market is not in control of the government but it can take necessary measures to facilitate.
In order to address the issue of fiscal deficit, the government should take a firm decision to do less borrowing from the central bank. It should adopt strict fiscal discipline and cut drastically non-development expenditure. It is a positive development that the government has made certain tough proposals in the budget to reduce fiscal deficit.
Important macroeconomic indicators inflation, current account and fiscal deficits, public debt, revenue collection, forex reserves and FDI have shown downward trend that is likely to impact economy during forthcoming fiscal year. Managers of national economy will have to burn mid-night oil to ensure that macroeconomic indicators change for the better. Much will depend upon fiscal and monetary measures that the government and the SBP would implement during FY09-10.
The most serious problem that threatens economy and society alike is inflation that has been persisting during the past four years despite tight monetary policy pursued by the SBP.
The contributory factors are: expansionary fiscal policy of the government and borrowing from the SBP despite its repeated assertion that the government should borrow from commercial banks or financial market, weak supply and high demand triggered by consumption based economic growth, increase in prices of oil, edible oil and other food group items in international market and weak political will of the government to take action against market players who have manipulated market to their benefit by profiteering.
The economy is simply not able to "take off". It goes without saying that present economic assistance did help in the country's economic illness and took it out of crises situation but the fact remains that recovery is and stability needs rethinking of economic policy issues.