Pakistan’s economy has almost always been in the doldrums, and the country is always one step away from a major crisis. Historically the government has depended on bailouts from the IMF or World Bank or loans from friendly governments. The Imran Khan government, however, has done all of this and yet is still unable to resolve the economic crisis.
Despite all this, the government simply believes in propaganda and maintaining a narrative in the eyes of its base so every few weeks it creates the buzz that everything is going to be great. This has happened once again.
As economic journalist, Khurram Hussain wrote in his latest column, “IT is hard to recall the last time a growth spurt in our history started facing critical challenges so fast. It was only a few weeks ago, in the run-up to the budget, that we were all told to celebrate the return of GDP growth to four per cent and anticipate even more momentum in the fiscal year ahead. The budget sought to put more wind in the sails of the economy and for a while was hailed by the business community for all the tax breaks that they thought they were about to receive. And then we read the fine print and realised things are not as they seem. Now the challenges are growing faster than the economy and the business community is finding out that all that glitters is not necessarily gold. As the data pours in, a picture is slowly emerging of manufacturing having hit a peak, and the external sector sinking back into the deficits it had so jubilantly just been pulled out of.”
Hussain argues “Having launched the gravy train of ‘incentives’ for industry on a massive scale last year, they now have to find ways to keep it going or it will grind to a halt as quickly as it started to move. This is why new ‘incentives’ for industry are being announced every month, and public spending will need to kick in very quickly to further support demand in the economy. But these ‘incentives’ eat away the fiscal base on which economic stability is ultimately pegged in our country, and if left unchecked, the resultant growth from these ‘incentives’ depletes the foreign exchange reserves. The cycle inevitably completes itself every time as growth gives way to a crash.”
Hussain concludes by noting “Activity picks up while the gravy train runs, but slows down almost as soon as the gravy runs out.”