ISLAMABAD: Former Finance Minister and renowned economist Dr Hafiz A Pasha on Friday warned the PTI led government that Pakistan’s economy would be heading towards bankruptcy as blown out of full fledge balance of payment crisis could erupt in five months period with existing pace of deficit on external accounts.
“After getting latest data on current account deficit its really scary picture emerging on the economic front as imports are still increasing and exports are witnessing stagnant trends. With the existing pace of current account deficit the country could plunge into crisis like situation within five months period,” Dr Hafiz Pasha extended warnings while talking to The News on Friday.
The alarm bells must have started ringing among dwellers of Q Block (Finance Ministry) at Pak Secretariat but they seem in no urgency, said one top official of government who knows exact ongoing economic developments happenings in recent weeks told The News in background discussions.
This warning has come from one of top economist of the country at a time when the International Monetary Fund (IMF) has slashed down the real GDP growth projection to 3.3 percent for the current fiscal year against earlier projection of 4 percent. The IMF also projected GDP growth below 6 percent of GDP in five years period.
The Ministry of Finance has projected the current account deficit at negligible level by end of tenure of the PTI led regime where they projected it at less than 0.5 percent of GDP. Contrary to this assumption, the IMF has projected that the current account deficit will be standing at 3.3 percent of GDP by end of PTI led tenure in 2022-23. So this kind of vast differences is really disturbing.
On other hand, the Ministry of Finance under the PTI led regime has prepared highly over ambitious macroeconomic framework under which will be unveiled along with coming mini budget before the Parliament next week. “This macroeconomic framework is inconsistent and highly flawed and he has been greatly disappointed,” Dr Hafiz Pasha said and pointed out that the country was heading towards eruption of crisis on external accounts within five months with the existing non serious attitude of the government on the front of economy.
He said that the country would require higher investments and savings rates in percentage of GDP to fuel the growth in the range of 6 to 7 percent over the next five years. The investment to GDP ratio, he said, stood in the range of 16 percent of GDP that would be required to increase to 24 to 25 percent of GDP. The national savings to GDP will have to jack up to over 23 percent in next five years. “Pakistan cannot achieve 7 percent GDP growth rate without construction of two mega dams and bringing efficiency in agriculture sector,” he said and added that the agriculture sector was facing the worst situation and the government was portraying rose picture.
“In order to bring down the current account deficit from existing level of 6 percent of GDP to less than 1 percent of GDP in five years, Dr Pasha said that the trade deficit would have to bring down drastically by halving it 50 percent. Alone the exports will have to increase from $24 billion to $60 billion,” he added.
“I could only wish to see all this happening good things in the down line after five years but the flawed macroeconomic projects will lead us nowhere in accordance with ground realities,” he added.
However, the sources said that the Ministry of Finance has projected the budget deficit of 5.6 percent of GDP for the current fiscal year despite this fact that the deficit had already touched 2.8 percent of GDP for first half of the current fiscal year.
But the sources said that the budget deficit could be divided into 40:60 ratios in first and second half of any fiscal year keeping in view fiscal data of last two decades. For instance the budget deficit stood at 2.2 percent of GDP in first half of the last fiscal year 2017-18 and then it hiked to 6.6 percent of GDP in whole financial year of 2017-18. It is not known how the PTI led government will be able to restrict the budget deficit within desired limit of 5.6 percent of GDP till June 30, 2019 when it had touched 2.8 percent of GDP in first half of the current fiscal year.
The government desired to bring the budget deficit down to 4 percent of GDP in five year tenure of the PTI led regime till 2022-23., the sources concluded.