This is apropos a Business Recorder op-ed “A fragile balance of payments” by noted economist Dr Hafiz A. Pasha carried by the newspaper yesterday. That facts are always sacred is a fact that cannot be overemphasized. The statistics on the external balance of payments of Pakistan in 2023-24 released by the SBP (State Bank of Pakistan) say it all.

Indeed, ours is a fragile balance of payments as pointed out by the learned writer. In my view, fiscal prolificacy is exacting its toll on each and every sector of our economy for the chagrin of the entire nation. The writer has concluded his argument by saying that “we await the finalization of the new EFF with the IMF.

It promises to be perhaps the toughest ever in terms of the performance criteria and structural benchmarks. The federal budget of 2024-25 already has included the heaviest dose of additional taxation. Electricity tariffs have recently been raised substantially.

Also, the IMF has projected 16% depreciation in the value of the rupee in 2024-25, which will also add to inflationary pressures. Overall, 2024-25 promises to be an eventful year.” I have a couple of questions for this distinguished economic expert: Has the SBP lost sight of strong likelihood of rupee devaluation during the ongoing financial year that would be adding to inflationary pressures because it has reduced interest or policy rate by 100 basis points to 19.5 percent on improved inflation outlook? Or, are we facing a situation where the implication of theory is inconsistent with observed economic data?

Haider Ali Bangash

Peshawar

Copyright Business Recorder, 2024