Even though the government has secured a vital $7 billion bailout from the IMF, the multilateral ‘lender of last resort’ still expects Pakistan to miss its growth target for the current fiscal year. In its World Economic Outlook report released on Tuesday (October 22), the IMF forecast that the country’s economy would grow by 3.2 per cent in the current fiscal year, falling short of the government’s 3.5 per cent target for the same period. The IMF also projects inflation to remain in the single digits for the current fiscal at 9.5 per cent and a relatively modest current account deficit of around 1.0 per cent. While the IMF’s forecast is not exactly blue skies and sunshine for a developing country with a rapidly growing population like Pakistan, it is still more optimistic than the 2.8 per cent growth rate and 10 per cent inflation projected by the Asian Development Bank and the World Bank. It must also be noted that meeting the IMF’s comparatively rosier projections is contingent on the government meeting the targets set under its new funding programme. This is something Pakistani governments have mostly failed to do in the past often due to political pressure.
While the government’s tariff hikes and tax increases might have helped secure the bailout and stabilise the economy and inflation has been significantly reduced, the steps taken to reach this stage have not gone down well with a people under more financial pressure than at any point in the last ten years or so. Most people are still struggling to pay their bills and find jobs that pay enough for them to meet their living expenses. Prices might no longer be rising as fast but they are still much higher than what they were three or four years ago. The same cannot be said for incomes or job prospects and the relatively modest growth rate projected by the IMF for the current fiscal indicates that this picture is not going to change any time soon. Even if one looks further ahead, the IMF only expects growth to rise to about 4.5 per cent by 2029. By then, it is estimated that the country’s population will have grown by as much as 10.1 per cent and, given our disproportionately young population, the working-age population will likely rise even faster. This means more stiff competition for a rather small pool of jobs and meagre incomes.
The longer that people do not see any returns from the government’s economic stabilisation track the greater the pressure to change course will be, even if doing so will not really result in a better economy. So what can be done to untie this knot? For one, the government has to take steps to build a more dynamic and productive private sector that can attract the sort of foreign investment that the country desperately needs. This will not only help boost jobs and incomes but also help ensure that the economy can grow without widening the current account deficit, something which has been a persistent problem for Pakistan. It is also just as important to ensure that large businesses, landowners or developers and traders do their fair share when it comes to consolidating state revenues. As things stand, the burden for fiscal discipline and reform is falling disproportionately on the shoulders of the ordinary salaried individual. This is not only unfair but unsustainable too.