Challenges before PTI
Among the myriad economic challenges facing the incoming PTI government two important ones are stabilising the local currency and building the foreign exchange reserves.Over the last few months, the country's economic situation has worsened steeply as the foreign exchange reserves have depleted due to widening of current account deficit and repayment of previous loans. Reserves are standing at $9.5 billion, which are enough to cover less than two months imports bill. Reserves would come under further pressure as the country would have to repay two billion dollars in the next few weeks.Meanwhile, the current account deficit is widening at a rapid pace, which is eroding the reserves of the country. The current account deficit stood at $18 billion during previous fiscal year.Similarly, Pakistani rupee is depreciating as the dollar recently had gone beyond Rs130 last week.
On the other hand, the budget deficit is expectedly to go beyond 7 percent of the GDP (Rs2.5 trillion) during FY2018. Pakistan's debt has increased to an unsustainable level of Rs24.5 trillion or 72percent of total size of economy. The public debt of Rs24.5 trillion includes domestic debt of Rs16.5 trillion and external debt of Rs8 trillion.Caretaker Finance Minister recently said that debt would rise to 74 percent of the GDP during ongoing fiscal year. The fiscal responsibility and debt limitation act, 2005 (FRDLA, 2005) had a limit of debt of 60 percent of the GDP.
The PTI chairman, in a recent media talk, said that the country's economy is facing serious challenges. He said that fiscal and trade deficit are touching all time high level.Furthermore, the rupee is touching historic low and public debt is ballooning. Khan has termed all these economic issues as a result of dysfunctional economic departments and failed governance system.He vowed to reduce the cost of doing business and bring investment in the country after eliminating corruption. Outlining its economic policy, PTI in its manifesto has said that it would boost the tourism industry, develop the IT sector to build a knowledge economy, strengthen international trade,revitalize the textile sector and push exports. It would unleash Pakistan's potential in agriculture, revamp the livestock sector, build dams, tackle Pakistan's water scarcity challenges and revive the fisheries industry.
No wonder, the business community has pinned its hopes on the economic revival policies of the next government.The Islamabad Chamber of Commerce and Industry (ICCI) has called upon the PTI to announce a short-term plan for quick revival of the economy. The ICCI has said that the economy of Pakistan is currently confronted with many challenges as the rupee has witnessed record depreciation, trade deficit has swelled to over $ 37 billion. Instead of becoming a manufacturing hub, Pakistan is fast turning into a trading country. According to ICCI all these challenges demand that the new government should accord top priority to form a new strategy in consultation with private sector to turn around the dwindling economy.
Economic experts have warned that the newly elected government would have to approach International Monetary Fund (IMF) for a bailout package to stabilise the external sector. A senior leader of PTI has stated that the new government would decide to approach the IMF for fresh bailout package after thoroughly reviewing the economic situation and on the basis of briefings from the ministry of finance and Federal Board of Revenue. It is clear that the situation is deteriorating fast and the new government will have to move with speed to form a short term plan and a long term strategy to convert its economic vision into reality.