Saturday February 24, 2024

Economic Rubik’s Cube

November 26, 2022

Sri Lanka, once the leading economy of the South Asian region, in terms of per-capita income and human development, has, in a shocking turn of events, become an economic basket case. Economic mismanagement, reckless borrowing, failed agricultural policies and an inability to increase exports ruined decades of hard work in a matter of months. The decision to ban chemical fertilizers without giving its farmers an adequate substitute proved to be especially foolish and disastrous.

Although, Pakistan has yet to commit a folly on par with Sri Lanka’s fertilizer ban, our economic situation has many of the same components as pre-crisis Sri Lanka. We have accumulated a mountain of debt and failed to raise exports or foreign direct investment to the levels needed to pay for it. It would not be out of order to say that we are on the same trajectory as Sri Lanka. Our government finds itself in a catch-22 situation; if it follows the terms of the IMF and cuts spending while raising taxes, we risk a recession. On the other hand, if the government refuses to follow the terms, we go into default. It will take never before seen levels of policymaking genius to get the country out of this gordian knot.

Hasnain Pirzada