According to a report released by the Institute for Policy Reforms, the country has been falling behind growth targets for the last six months despite achieving economic stability with active support of the International Monetary Fund. The fiscal deficit remained within the target at 1.7 percent during the first six months of the current fiscal year while revenue collection and expenditure largely remained within the limits. The rate of inflation has dropped and consumer price index fell within the period from July 2015 to February 2016. However, further decline in inflation stalled after the finance minister increased general sales tax on some luxury items and rupee lost its value in three months between August and October.The government had set six percent growth target for the large scale manufacturing sector, but achieved only 3.9 percent and production of major crops in agriculture sector also dropped, especially cotton lost about a third of its production and sugarcane crop is also unlikely to meet its target.
The report says that entire focus of the policy makers is on balance of payments and fiscal deficit while the government is likely to miss the investment target despite increasing credit facility for the private sector. As a matter of fact, the government needs to introduce reforms in administrative, industrial and agriculture sectors to stimulate the economy. The report says that too much hopesare pinned on China Pakistan Economic Corridor for economic revival without introducing fundamental reforms. The balance of payments poses serious challenge to the government’s budgetary efforts as exports are declining and foreign direct investment is not encouraging. As a result, the economy is heavily relying on expensive foreign borrowings. Experts believe that the piling up loans will reach a saturation point and debt repayment will become a snowball in the years to come. The GPS status was seen as the big achievement of the government, but exports recorded a fall of 15 percent during the first six months of the ongoing fiscal year.
The government will have to show its capability and capacity to introduce structural reforms in every area of the economy. Depending solely on foreign loans to achieve growth target will push the future generations of the country into debt trap. The only panacea to boost the economy is in reforms and minimal dependence on the foreign donors. The focus of the government should be on agriculture and industry. Instead of offering tax amnesty scheme, the government should offer attractive business environment for investors without asking them the source of money.
