Pakistan’s Economy Remains in Doldrums; No Quick Fixes

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The Pakistani media and the caretaker government can shout from the roof tops that Pakistan’s economy is doing better as current account deficit is ‘shrinking’ and FDI inflows are ‘increasing’. However, the reality is that the economy remains in the doldrums and such statements are misleading and problematic.

The mainstream media is full of articles that as per the State Bank, Pakistan posted a current account surplus of $397 million in December 2023, for the second consecutive month, that helped it contain the six-month deficit to $831 million, down from $3.6 billion during the same period in the last fiscal. Similarly, FDI inflows have risen by 35 percent to $863 million from $640 million in the same period.

As an editorial in Dawn noted, “these are welcome developments in these times of economic crises and pain. But how sustainable are these small mercies? Will they help the economy grow and create jobs, and end our balance-of-payments troubles? The improvement in the current account is primarily the outcome of the temporary ‘emergency’ measures being implemented by the government to restrict imports. The hike in export revenues and an upswing in home remittances and FDI in December helped the country pull off the surplus. Yet the upturn in these areas, though welcome, is negligible, and does not represent a steady trend.”

In conclusion, the Dawn warns “the economy is in the doldrums. The recent improvement, if we indeed see it as one, is an artificially constructed deviation from the normal, as our balance-of-payments woes are hardly far away from morphing into sovereign default. The economy contracted in the last fiscal year and growth projections for the ongoing one do not inspire much hope for the future. Exports are stagnating because of low productivity and reliance on one commodity, ie, textiles. Foreign investors here appear to have lost whatever little confidence they had and are departing. Local investors are not ready to invest either, at least not unless their ventures are subsidised. Remittances remain subdued. Poverty continues to rise, as does food insecurity. The population is growing rapidly, and the government has no money to provide education, clean drinking water, health facilities, or other public services. The world in general is done with our unwillingness to clean up our own house. It is frustrating to see the economic fortunes of a large country swing with the influx and exit of a couple of billion dollars from its economy. We have reached this point for a reason. We are here because our rent-seeking ruling elites are not invested in Pakistan’s future.”

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Author: Alia Khan