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October 13, 2017



What went wrong with our economy?

Islamabad :Nothing is new on the economic front as it is the same old story that happened in this country several times in our chequered history in the past.

This is exactly the cost the country and its people had to pay for plunging into discourse of political instability in the aftermath of Panama scandal. There is no focus on the economy in the last one and half year period, and we all are responsible for this whole mess at individual and institutional levels.

 If noble prize winner economist becomes economic wizard of Pakistan and political instability remained the constant factor, nothing will happen even in next decade. Without changing basic structure of the economy, only rhetoric will not bring any desired improvement on the economic front.  

The country’s economy is on square one and heading towards the position it was in 2017-18 on account of perpetual imbalance on internal and external fronts by witnessing surge in twin deficits--current account deficit and fiscal deficit--where it had started in May 2013 when the PML-N led government had assumed powers after winning general elections. 

The fiscal deficit had peaked to over eight percent of the GDP after inserting all kind of liabilities and the rising external deficit had evaporated the foreign current reserves that had nosedived to $06 billion, leaving no other option but to knock at the door of the IMF for repaying old loans. The IMF had again rescued us from default at that time in 2013.

However, one thing is altogether different this time in fiscal year 2017-18. Those who are at the helm of affairs and enjoy real power will have to keep in mind that there were 21 times in the past when the IMF had rescued us at the last moment from hitting a default situation by extending its programme. But there is growing apprehension that the IMF will treat us differently this time owing to variety of reasons in the aftermath of Trump’s policy towards Islamabad, so concerted efforts are needed to avert blown out of full- fledged crisis like situation.

Will it be a right decision to put all eggs in one basket? Our reliance on China has been increasing manifold, and it is yet to see whether Beijing will come forward to rescue from facing balance of payment crisis after providing us $54 billion for energy and infrastructure projects under China Pakistan Economic Corridor (CPEC).

Who is responsible for this whole mess on the economic front? This is a very pertinent and relevant question.  After winning elections in 2013, the PML-N leadership appointed Ishaq Dar as finance minister who enjoyed full political backing of the prime minister in last four and half years rule. Mr Dar had negotiated a programme with the IMF and completed it successfully first time in the country’s history. The macroeconomic figures improved by and large in last four years till October 2016 when the IMF programme completed. The credit goes to Ishaq Dar and Dr Waqar Masood. They managed to create fiscal space although through borrowing and building up of foreign reserves.

Here the question arises what were reasons behind this achieved macroeconomic stability had evaporated with so much pace that after completion of the IMF programme, the country was again heading towards crisis within one and half year period. The answer is very simple. The hard earned macroeconomic stability was evaporated so suddenly because it was not based on sound economic fundamentals.

It was dilemma of the PML-N led regime that they believed in concentration of power. Ishaq Dar, who was always considered as deputy prime minister, was assigned to catch 30 balls with two hands as he was heading almost three dozen committees ranging from politics to constitution, privatisation and what not. In order to pose rosy picture, the quality of data was compromised on all accounts.

It was the biggest failure of the PML-N led regime they could not boost exports in last four years and imports did not slash down despite massive reduction in oil prices in the international market. It was political misadventure that the government did not pass on increase in oil prices in last couple of years, resulting into increase in consumption of petrol by 30 percent.

The current account deficit peaked to $12.2 billion for last fiscal year. For first two months the external deficit stood at $2.2 billion, and the IMF has projected that it might go up to 4.9 percent of the GDP or close to $16-17 billion for 2017-18.

Although the FBR’s absolute collection improved, but the PML-N led regime failed for broadening of narrowed tax base. The loss making entities continued problematic area which could not be quick fixed but why the government could not appoint a right man for the right job.

There is increasing demand of resignation from Finance Minister Ishaq Dar, who had played his innings very well in last four and half year rule. Now the time has come that he should say goodbye for the sake of country because challenges on economic front requires a full time finance minister who only focuses on arising challenges instead of facing trial in NAB court.