EDITORIAL: Prime Minister Shehbaz Sharif linked ending terrorism as a prerequisite to economic stability. There is no doubt that in spite of successful military operations against terrorists the number of terror attacks have markedly escalated in recent months with a consequent rise in fatalities.
The way forward is not only to further strengthen intelligence gathering to forestall attacks but to distinguish between the different terror groups operating inside the country and proactively seek rapprochement with those seeking meaningful political engagement, including those groups who have been outlawed and denied the right to protest.
Be that as it may, the Prime Minister’s linkage challenges his own claim, and that of his Finance Minister Muhammad Aurangzeb, that economic stability has been achieved – a claim premised on a current account surplus and a major decline in inflation.
The current account has sadly gone into a deficit mainly because the rise in exports were on the back of Indian banning of rice exports, since lifted, and the political unrest in Bangladesh, since resolved.
Exports continue to be led by the private sector which was the recipient of fiscal and monetary incentives in the past that have largely been withdrawn as per the agreement with the ongoing International Monetary Fund (IMF) programme.
The reduction in the discount rate from 22 percent in April last year to 12 percent recently has certainly reduced the cost of capital however this is higher than the regional average (double that of India) and therefore still does not provide a competitive edge to exporters.
True that credit to the private sector rose exponentially - from 123 billion rupees July-12 January 2023-24 to 1632.6 billion rupees July to 10 January 2024-25 yet the bulk of this rise was in the stock market which neither reflects a rise in output nor a rise in income of the lower to middle income earners of this country.
This is supported by the large-scale manufacturing sector (LSM) statistics released by the Pakistan Bureau of Statistics whereby LSM registered negative 3.81 percent in November 2024 year on year and negative 1.19 percent month on month.
Imports continue to be curtailed through administrative measures to reduce the pressure on the current account which, in turn, reduce productivity of those sectors that are reliant on raw material imports for their output.
Inflation has come down from 28.73 percent July-January 2023-24 to 6.50 percent in July-January 2024-25.
This is an achievement of note though it is on the back of calculating (i) the subsidised electricity rates for the poor and vulnerable rather than taking the average rate; and (ii) subsidies on specific essential items sold in Utility Stores though the empty shelves in these stores bore testimony to insufficient supply.
Independent economists argue that the rate is in double digits; however, a critical issue that is ignored is that there has been a 20 to 25 percent erosion in the incomes earned of the bulk of the country’s workforce operating in the private sector (estimated at 93 percent), which no doubt accounts for the rise in poverty levels to 44 percent.
Foreign direct investment, however, has risen by 56 percent – from 976 million dollars in July-January 2023-24 to 1.525 billion dollars in the comparable period of this year.
However, one must see this amount in the context of the over 25 billion dollar Memoranda of Understanding signed with the private sector of friendly countries (China, Saudi Arabia, the United Arab Emirates, and Turkey), as well as the amount in a more global and regional context (globally total FDI is more than a trillion dollars while in a regional context FDI inflows into China were 747 billion dollars January-November 2024 and India at 29.7 billion dollars in six months last year).
To conclude, one must unreservedly appreciate the past, present (and future) sacrifices by the armed forces in dealing with the menace of terrorism; however, it is hoped that in line with these sacrifices the elite, defined as the major recipients of our tax money, also voluntarily sacrifice what was budgeted for them for a year or two till economic stability is attained, given that borrowing, both externally and internally, to meet our budgeted outlay as well as pay off past loans (interest as well as principal as and when due) is putting an unbearable burden on the people of this country.
Copyright Business Recorder, 2025
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