Sunday September 26, 2021

Economic growth

July 31, 2021

This refers to the editorial ‘Policy rate’ (Jul 29). It hit the nail in the head when it said that “now the increasing current account deficit is also staring us in the face and needs a comprehensive strategy to tackle it”. The current account deficit is the country’s number one problem and must be dealt with on an urgent basis. On the other hand, it was surprising to learn that the State Bank of Pakistan (SBP) governor believes that “in an emerging country like Pakistan the current account deficit of a modest two-three percent of the GDP was sustainable”. In effect, the SBP governor was recommending that further borrowings, in dollar, could help the country manage its finances in a better manner. It is important to mention here that the country is already entangled in a debt trap, and without a higher volume of exports, the country cannot repay the existing loans that were mostly obtained for consumption purposes. The trade figures for June 2021 have sent an alarming signal – an unprecedented rise in imports and a large current account deficit. If the trend continues, the country may end the year with an import bill of around $70-75 billion and a current account deficit of $15-18 billion.

There is an urgent need to disallow the import of luxury and non-essential consumer items to reduce the country’s import bill by at least 20 percent. The government must make concerted efforts to expand the tax base to strengthen the economy.

Arif Majeed