Economy not in turnaround, rather it is in ICU, say economists

In recent weeks the Imran Khan government has boasted about an ‘economic turnaround.’ Economists, however, maintain that this is false and misleading and that the economy is actually in intensive care.

According to Anjum Altaf, Dean of School of Social Sciences at LUMS, the so-called economic boost “comprises declines in the current account and fiscal deficits and increases in FDI and remittances. All these are misleading indicators but one is especially egregious and contradictory. Why is the increase in remittances considered part of the economic turnaround and something that governments consider worthy of praise? The increase in remittances is an outcome of greater economic distress in Pakistan. It is a false signal reflecting economic failure, not success.”

According to Altaf, “Before patting themselves on the back for ever-increasing remittances, policymakers should think through this phenomenon with understanding and empathy. Remittances grow for two reasons: individual migrants send back more money and the stock of migrants increases as more Pakistanis emigrate. The explanation for the first component has been provided above; it reflects the economic distress inflicted on working-class families by rapid inflation in Pakistan. But what is the explanation for the increasing number of Pakistanis seeking work abroad? It is the inability of the domestic economy to generate a sufficient number of jobs paying enough to sustain families of individuals entering the labour market. It is again a reflection of economic failure, not success.”

Finally, “The Pakistani economy is in intensive care and the indicators the prime minister has cited as evidence of an economic turnaround have behaved in exactly the same manner as they have after almost each of the previous 22 or so IMF hospitalisations. The real turnaround requires the creation of decent jobs which, in turn, calls for structural reforms and a framework for economic growth. While this may take time, progressively driving remittances down by providing jobs at home should be adopted by the government’s team as a leading measure of the success of a real economic turnaround. Involuntary migration forced by economic desperation is a blight on the face of the nation, not something to celebrate.”

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