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The international agency, Moody’s, while retaining Pakistan’s B3 rating maintained that the country’s medium-term economic outlook was strong on the back of China-Pakistan Economic Corridor (CPEC) project, aimed at addressing critical infrastructure constraints and continuing macroeconomic stability-enhancing reforms initiated under the International Monitory Fund (IMF) three-year Extended Fund Facility which ended last year.
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owever, it drew up a long list of vulnerabilities for Pakistan’s economy, particularly the burgeoning current account deficit caused by the rising imports and falling exports as well as widening fiscal deficit.
According to the agency, the foreign exchange reserves though grew up fourfold during the past four years was still low as compared to the current account payments.
The IMF had also showed similar concerns for the economy of Pakistan, when it reviewed the situation under the Article IV Consultation.
While praising the present government’s efforts over the past four years to salvage the economy, it noted with concern that macroeconomic stability gains made during this period have begun to erode which posed serious risks to the economic outlook of the country.
According to it, the current account deficit has widened and was expected to be at three percent of the GDP in fiscal year 2016-17 because of the quickly rising imports and declining exports.
In all these and other reviews, the current account deficit was highlighted as one of the major concerns for the economy in the coming days.
It is in this context that the State Bank of Pakistan allowed unprecedented depreciation of over three percent in the exchange rate of local currency for the US dollar earlier this month.
The move was in line with the long-running demand of the exporters who are steadily losing their share in the international market, as well as with the IMF’s position that the local currency is overvalued in the range of 10 to 20 percent.
However, the move drew a strong reaction from the finance minister who favours a strong rupee in an effort to keep inflation under control to avoid political backlash for the government at the time when it is heading towards general elections.
The government’s move not only caused dismay for the country’s exporters but many analysts also believed that it has also weakened the resolve of the central bank to assert its independence.
The growing apprehensions with regard to dismal performance of exports which ultimately lead to further increase in the current account deficit were fully backed up by the All Pakistan Textiles Mills Association (Aptma) recently when it reported that the country has tremendously lost its textile exports share in the global market to its competitors.
In view of these concerns, all that is is needed is a concerted effort by the government to critically look into the situation and take the requisite measures on urgent basis to stem the rot.
However, it seems that the economy and related matters are no longer in the priority list of the government, which is also evident from the meeting between Prime Minister Nawaz Sharif and the representatives of the Sialkot Chambers of Commerce and Industry last week.
Everyone had expected that the prime minister would use the opportunity to discuss the problems faced by the business community and explore ways and means to jack up the country’s declining exports. A problem which has been highlighted by the international agencies, the central bank as well as the businessmen of the country, who call it a major challenge for the economy as it would ultimately pile up pressure on the foreign exchange reserves for making external payments.
According to the IMF, the future contracts and obligations of the central bank stood at 3.6 billion dollars in June as against two billion dollars a year ago, which means that the country’s foreign exchange reserves would slide down to around 17.23 billion dollars as against 20.83 billion dollars reported as on July 14.
Ironically, there was no mention of these concerns and challenges in the speech of the prime minister broadcasted on television.
The main focus of the prime minister’s address to the businessmen was Panamagate scandal and the politics of agitation that the opposition adopts, particularly Imran Khan’s Pakistan Tehreek-e-Insaaf.
The prime minister recounted the achievements made by his economic team but conveniently ignored the gathering storm which everyone believes is around the corner.
Though he squarely blamed the opposition for what was not achieved by his government and accused it of creating hurdles in the economic progress of the country. In fact his government should also partly share the blame.
The government’s excessive obsession with politics is also partly responsible for the current state of affairs.
There has been regular mention of a steep fall in the exports by the international agencies as well as the central bank over the past several months, but unfortunately, there has been no serious effort on the part of the government to address this issue.
In January, the prime minister announced a hefty package of 180 billion rupees to boost exports, but after that there were no back-up effort to make this package a success. Resultantly, the exports did not fare well in the last fiscal year despite a series of incentives announced by the government.
Energy shortages, high cost of production, sales tax returns, overrated local currency and lack of value addition are some of the problems which are adversely affecting the exports.
The government maintains that it had addressed the energy problems to a large extent by ensuring uninterrupted power supply to industry, but industry officials say high cost of electricity has made it difficult for them to run their businesses.
Several other issues also needed proper attention from the government, but very little effort has been made by its functionaries to attend to these problems.
The government has a commerce minister, who was expected to launch serious efforts to address all these concerns, but no such endeavour was visible on his part or his ministry.
With government now completely bogged down with the Panama papers issue, one does not foresee any move by the authorities to address the consistent problems in the coming months, particularly when the finance minister himself has been embroiled heavily in the controversy.
Ironically, Pakistan Muslim League-Nawaz (PML-N) has been known as a business friendly country as its leaders themselves have been very successful businessmen. The members of this community formed the bedrock of its government’s support.
However, the business community has generally complained that it was not given due attention during the current tenure of the PML-N government.
Now that all eyes are set on the decision of the Supreme Court on the Panama papers issue which will decide the fate of the prime minister as well as his finance minister, one does not expect the government would be able to concentrate on the economic challenges faced by the country, even if the court verdict was not as adverse for the government as expected by the opposition.
From now until the general election, the country would virtually be in an election mode in which the government would try to take popular and populist measures to win the support of the masses and avoid any step that create negative sentiments among the people.
The business community and exports have to wait for matters to settle down to get their concerns addressed and this period may extend to the general elections and thereafter.
The writer is a senior journalist based in Islamabad
