Chal­lenges be­fore PTI

The Pak Banker - - FRONT PAGE -

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.

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