close
Wednesday May 22, 2024

Glimmer of hope

By Dr Farrukh Saleem
June 04, 2023

The economic outlook appears grim, even alarmingly so. The consumption of diesel has plummeted by 50 per cent, indicating that port-to-upcountry commercial traffic and farm-to-market transportation is sharply down. There’s been a massive drop in auto sales. Furthermore, electricity production has experienced a staggering 23 per cent decrease, causing the wheels of the economy to grind to a halt.

Large Scale Manufacturing (LSM) has slumped by 25 per cent, indicating a sharp contraction in industrial production. Consequently, unemployment rates in major industrial cities such as Karachi, Lahore, Faisalabad, and Sialkot are likely skyrocketing. Adding to the woes, food inflation is rapidly approaching 50 per cent, exacerbating poverty rates and intensifying concerns regarding food insecurity, reaching unprecedented levels.

In terms of our external obligations, there is a pressing need to fulfill a payment of $3.7 billion by the end of June. Although we currently possess foreign exchange reserves amounting to $4.2 billion, the challenges persist beyond June and extend into the next fiscal year, as we face a significant gross external financing requirement of $41.8 billion. On the external front, the only way out is a bigger package from the IMF.

Who should bear the blame? By April of the previous year, the PTI government had left behind an unprecedented budgetary deficit and trade deficit. Subsequently, the PDM government took charge. At that crucial juncture, wise counsel advised ‘when in a ditch, stop digging’, emphasizing the importance of refraining from actions that could exacerbate an already difficult situation. The Ministry of Finance, within the PDM government, ought to have critically evaluated the circumstances, exploring alternative approaches and solutions instead of persisting with unproductive actions that only compounded the already dire consequences.

Who is really responsible? The intricate relationship between the economy and political stability has long been established. Over the past year, Imran Khan seems to have concluded that utilizing violence, chaos and anarchy will advance his political objectives. Consequently, the economy continued to deteriorate amidst the burden of uncertainty, insecurity, instability, confusion, and turmoil.

Where, then, can we find a glimmer of hope? Lately, there have been signs that our ‘permanent guardians’ may have finally recognised the extremely detrimental effects of Imran Khan-led and sponsored political instability on the ongoing economic downturn. While it is a belated response, their recent endeavours to quell the political turbulence represent a positive step in the right direction – and that, indeed, is the glimmer of hope.

What lies ahead? The terms ‘necessary’ and ‘sufficient’ are used in logic and reasoning to describe conditions or factors that are required or enough to bring about a particular outcome or result. When it comes to our current situation, political stability is undoubtedly ‘necessary’ for economic progress. However, political stability alone will not be ‘sufficient’ to bring about a positive, desirable outcome. To pave the way for economic success, we are going to need an economic roadmap that encompasses four crucial elements: clear economic goals, well-defined policy priorities, effective implementation strategies, and diligent monitoring and evaluation.

Amidst these considerations, the paramount question arises: Does our Ministry of Finance possess the capacity to establish a clear direction, align actions, and provide a structured approach that guides economic policymaking, ultimately fostering stability, economic growth, and prosperity? This inquiry stands as the mother of all questions, demanding our attention and deliberation.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: farrukh15@hotmail.com