Pakistan’s economy has always been in the doldrums, but the country’s leaders, political, military, and even technocratic, have always presented a sunny story about the economy. The aim has been to fabricate a positive narrative that ignores the underlying realities. One of the institutions that has indulged in this fabrication, according to economic analysts, is the State Bank of Pakistan.
In a recent column, Khurram Hussain writes “It is possible to quote extensively from the State Bank’s own documents through those years — how they built a sunny story around this constant and steady deterioration in the external balance, how they tried in vain to contain inflation (the discount rate was hiked by something like two percentage points in that year after having been held constant for a number of years before) while at the same time fuelling monetary expansion through rising government borrowing from the State Bank.”
According to Hussain, “every spurt of growth in the country’s history has been accompanied by a story saying the good times are here to stay.” This was done in 2003-2005, then again 2013- 2016. “In November 2014, for example, at a time when growth was powering on, the State Bank pointed to remittances as the main source of strength in the external sector as the trade deficit mounted. The next year it pointed to the surplus in the financial account saying it would help “ensuring an upward trajectory in foreign exchange reserves” even as the current account was poised to go over a cliff. In November 2016, halfway down that cliff, it said: “Pakistan’s continuous build-up of external buffers over the last three years has improved its resilience against external uncertainties.” This was a prayer, nothing else.”
Hussain concludes his piece by noting “I was reminded of all this once again as I saw Reza Baqir try his hand at this waltz for the third time during the monetary policy announcement this week. The accompanying text of the monetary policy statement says “there were good reasons to expect that, unlike several previous growth upturns in Pakistan, the current economic recovery would be accompanied by external stability”. It does not tell you that the State Bank said the same thing at the start of every previous growth upturn as well.”
