EDITORIAL: Current account deficit has declined 67 percent to 3.8 billion dollars (July-January 2022-23) against 11.56 billion dollars in the comparable period the year before, as per data uploaded by the State Bank of Pakistan on its website.
Any optimism with regards to this statistic is easily clarified by itemising four related observations backed by data uploaded on the website of Finance Division titled Economic Update/Outlook January 2023: (i) large-scale manufacturing sector rose by 7.2 percent July-November 2021-22 as opposed to negative 3.6 percent in the comparable period of this year.
This is partly attributable to the extreme administrative measures taken by the incumbent government to curtail imports that include inordinate delays in opening of letters of credit for essentials, including fuel and cooking oil, as well as non-essential and luxury items – measures that coupled with the disastrous policy of controlling the interbank rate without having the foreign exchange reserves to intervene in the market account for the jump in inflation from 9.8 percent (July-December 2021-22 before the launch of the Khan’s relief package) to 25 percent in the comparable period of this year; (ii) remittances, a desired form of foreign exchange reserves also fell by 11.1 percent July-December FY23 as opposed to the comparable period of the year before due to the flawed policy of controlling the interbank rate; (iii) all market data is on a downward trajectory – Pakistan Stock Exchange index, market capitalisation in rupees by 8.8 percent but in dollars by a whopping 28.8 percent (1 July 2022 to 27 January 2023); and (iv) Foreign Direct Investment July-January 2022-23 plummeted by 44 percent even though in the comparable period of last year the total amount was an appallingly low 1.22 billion dollars.
There is no evidence today that the economy has stabilised or is on the path towards stabilisation. Notwithstanding claims by the economic team leaders that the International Monetary Fund’s (IMF’s) ninth review’s success is imminent, which is expected to unlock around 11 to 12 billion dollars in pledged assistance by friendly countries - rollovers and additional assistance - yet this is not a source of comfort for two reasons.
Firstly, reliance on external debt is budgeted to rise by around 40 billion dollars this year alone and while the government has been quick to impose more indirect taxes in the mini-budget, whose incidence on the poor is greater than on the rich, yet no commensurate decrease in current expenditure has been announced yet. Instead the cabinet number has risen to 83 and the justification that 14 are honorary members does not provide a comfort level as there is no mention of the perks and privileges they enjoy.
Prime Minister Shehbaz Sharif constituted a National Austerity Committee with effect from 13 January 2023, that submitted its recommendations promptly. The cabinet has approved some of the recommendations that are projected to begin with immediate effect but these measures definitely fall short of the needed reduction.
Furthermore, there are serious issues with the performance of many a PML-N cabinet member especially as most of the economy-related ministries are held by the PML-N, barring Commerce though that portfolio is also highly dependent on the decisions taken by the Finance Ministry.
The onus to ensure that all economy-related portfolios/sectors move out of the red through improved governance rests with Shehbaz Sharif and the sooner he accepts responsibility the better it would be for the eleven-party government as well as the hapless people of this country.
Copyright Business Recorder, 2023