close
Wednesday June 19, 2024

Economy or ego: choose your battles wisely

By Mansoor Ahmad
June 05, 2024
A currency broker stands near his booth, which is decorated with pictures of currency notes, while dealing with customers, along a road in Karachi, Pakistan January 27, 2023. — Reuters
A currency broker stands near his booth, which is decorated with pictures of currency notes, while dealing with customers, along a road in Karachi, Pakistan January 27, 2023. — Reuters

LAHORE: Two contrasting scenarios are emerging in the country; the economy is slowly improving while the political atmosphere is rapidly heating up. Normally in such cases, it is uncertainty that tends to destroy the economy.

The turnaround in the economy was unexpected. But all indicators show that there is improvement all around. Inflation that devastated the household budgets for the last four years is on a sustained downward trend, declining to 10 per cent in May. Food prices have declined from their peak. Wheat is cheaper by 20 per cent, chicken meat rates are down by 27 per cent, and edible oil rates eased by around 20 per cent. The prices of perishable items like onions and tomatoes are also on the decline.

Foreign exchange reserves are now in a semi comfort zone compared with precarious levels a year back. Exports increased to $2.79 billion in May, a 27 per cent increase as compared to $2.197 billion in May 2023. And this was the ninth consecutive month of an uptick in exports.

This has nullified the oft repeated claims of certain sectors that high power and gas rates have eroded their competitiveness. The trade deficit is constantly declining because exports are constantly increasing at a higher pace.

Still exports are much lower than imports. Remittances have nullified the trade deficit and put the current account deficit in the positive zone. Petroleum rates have gone down mainly because of a decline in global crude oil rates; this government deserves credit that it passed on the lower prices to end consumers although it was in dire need of revenues.

These are economic facts that cannot be denied. Still the worries of ordinary people have not eased. Incomes in the last four years have not kept pace with high inflation during this period. Easing of inflation does not mean that prices generally have come down (except food items based on higher supplies). The prices are still rising, but at a low pace while incomes are still not rising.

The central bank is unlikely to ease its policy rates in its June 10 meeting by more than 1.0 per cent.High interest rates are eating up most of the federal government revenues in debt servicing. However, one can say a sort of launching pad for economic revival has been laid. But would it be sustainable under current political polarization?

Political temperatures must cool down and a policy of accommodation from both the ruling elite and the main opposition party is needed. We can improve our economy only through consensus among all political forces. A charter of economy is badly needed.

The economy has to move up as we have to enrol more than 2.5 million children that are out of school. We have the largest stunted population of children under five. Around 56 per cent of our women are anaemic, and the infant mortality rate in Pakistan is one of the highest in the world.

We need to induct women in the economic stream, and, above all, think about the 4 million young people who enter the job market every year. Instead of creating new jobs we are cutting them down. All this could only be achieved through resources that would come with sustained economic growth.