Prime Minister Imran Khan and his advisors appear gung-ho about their foreign policy achievements and also believe they have Pakistan’s economy under control. However, a little knowledge of history would show that such policies have been followed repeatedly over the last 74 years, and only resulted in failure.
Economic columnist Khurram Hussain asks the question: “Our own history teaches us that every growth spurt plays out the same: government guns growth, imbalances emerge, reserves deplete, growth crashes. Why should it be different this time?”
According to Hussain “the story also remains the same. Historically, whenever governments have gunned growth they always tried to explain away the attendant imbalances with a story consisting of the same four elements. They argue that the imbalances are manageable, sometimes even going so far as to argue that they are healthy (as in machinery imports that will improve the economy’s productivity), that they are temporary, consisting of lumpy one-off payments, that they are offset by positive developments in other areas such as remittances or inflows under the financial account, and finally that they are due to factors beyond the government’s control such as rising oil prices.”
After tracing the history of such endeavors Hussain argues that this time round “The imbalances have already appeared, faster than anyone thought they would. The trade numbers for July and August have risen so fast they have taken everyone by surprise. But they were rising from January onwards, sending the currency plummeting by 10pc since May. The much-vaunted current account surplus has fallen back into deficit, and reserves are increasingly being shored up with foreign borrowing.”
Hussain concludes by pointing out that the key difference “between then and now is that the previous two growth spurts came after the country left an IMF program. The situation today is slightly different. They didn’t leave the program, but were relieved from its requirements for one year, due to Covid. Now that year has ended, and they have to come up with a stabilization plan at the same time as pumping growth, even as the songs of deficits past are playing in the background.”