Are we moving towards economic stability?
Well, the signs of improvement are showing up amid high inflation and unemployment rates.
But we will cover it with a different angle today.
So let’s start.
Stable Exchange Rate
Pak Rupee devalued considerably earlier this year. From Rs.120 for a dollar, it plunged to Rs.160 in a short period. But since then, it’s hovering around Rs. 160. Which is itself a good sign as it indicates the stability in the foreign exchange market.
Increasing duties have cut down the size of imports by 21% and that, in turn, leads to the third good sign.
Narrowing Current Account Deficit
The low import bill has lessened the burden on the balance of payments and decreased the current account deficit by 64% in the July-September period. It was an all-time high at around 19 billion USD in the Fiscal year 2018.
The inflation rate is high (11.4%), which is resulting in the high prices of the commodities. The decreased purchasing power has put an extra burden on the middle class.
People are losing their jobs as the unemployment rate is 6.1%, and as per the IMF, it will rise to 6.2% and won’t get better in the next two to three years.
No Cash Flow
The market is drying up because people are unwilling to invest their savings. This trend is harmful to the economy as it indicates a lack of trust in government policies.
Now, we have both good and bad indicators of economic progress, so how to judge if we are going towards economic stability?
To me, the determiner is to see who is calling the shots, i.e. making the economic decisions.
Well, the simple answer is the IMF.
The economic team of Pakistan consists of people who worked with the IMF and follow every single instruction coming from the global lender.
Some examples of these instructions are:
- CNIC condition for business purchase
- Documentation drive
- FBR reforms
- Tax collection target
We discussed before that CNIC condition is the major scuffle between the traders and FBR and FBR refused to withdraw the condition just because the IMF imposed it.
Similarly, an IMF team recently visited Pakistan and examined the progress of FBR in terms of tax collection.
Keep in mind, we sponsor such visits under the administration cost which they deduct from the debt installment.
They also set an unreal tax target of Rs 5555 billion, which is almost impossible for FBR to achieve.
Looking from this angle, it doesn’t paint a good picture of the economy. As the decision-makers have a little do to with the real issues of Pakistan.
They say we had no choice except to deal with the IMF, but that doesn’t mean we have to agree with all the conditions.
That’s the difference between this government and the previous ones. They used to play with IMF to get something in Pakistan’s favor.
Do you agree we should make decisions on our own?