Mother of all ills

This refers to the article ‘Elusive economic stability’ (January 15) by Dr Waqar Masood Khan. While the writer suggests that “the key to adjustment is the fiscal deficit”, I believe that the country’s critical issue is the current account deficit which occurs when a country’s imports are greater than the country’s exports. This gap has to be managed by raising external debt, which may not be available on reasonable terms, or alternatively implementing structural reforms in the external trade. Without any correction, the country faces a default situation with far-reaching implications.

Pakistan’s humungous import bill can be curbed by disallowing the import of luxury and non-essential foreign consumer goods which have flooded the market with the government’s open ended import regime. The ban on unnecessary foreign items can reduced the import bill by $7-8 million. Fiscal deficit is a percentage of the nation’s GDP and is an economic event in which the government’s expenditure exceeds its revenue. It is more of an in-house budgetary problem and can be managed indigenously by expanding the tax base, raising existing taxes selectively, printing notes and borrowing from the banks. It is hazardous to borrow dollars to bridge the fiscal deficit and cover rupee payments. The current account deficit is the mother of our economic ills and our primary focus must be on tackling it.

Arif Majeed

Karachi