The Asian Development Bank has projected 5.2 percent growth rate in the country’s gross domestic product for the current fiscal year and 5.5 percent for the next year. However, to reap the benefits of the growing economy, it has called for structural reforms in various sectors, including bank has highlighted the potential benefits of the China Pakistan Economic Corridor, but warns that Pakistan would only be able to avail the benefits of $55-billion investment if it continues to stride towards economic reforms. The energy sector, tax system and security are some basic areas of concerns which need to be taken care of. The report also points out another fact that Pakistan will not be able to fulfill its financial obligations with regard to the CPEC without boosting local and foreign investment as well as producing industrial surplus to enhance exports. There is a need to create business-friendly environment as the current trade and financial policies are not in line with the changing circumstances. It seems the only option before the government to maintain economic stability and keep foreign exchange reserves at comfortable level is to obtain foreign loans at high markup rates.
The pace of reforms initiated three years ago should continue and the government will have to take proactive approach to ensure security, macroeconomic stability and sustain economic gains. Earlier, the International Monetary Fund had expressed identical views on the challenges faced by the country in the areas of energy, fiscal deficit and external sectors. The report says that internal security has improved in recent years, but it needs continued efforts to consolidate theeconomic gains.The country could not set traditions of the diversification of products which Japan and other countries carried out to enhance their exports. There is pressure on the government to ‘rationalize’ the currency exchange rate and it is very appreciable that the finance minister has braved pressure not only from the international donor agencies, but also from the local exporters. Devaluation is not an answer to the economic woes. Instead, steps are required to increase industrial activities. If energy crisis and cost of production are the apparent reasons for the low export volume, weak global demand and low prices of commodities in the international markets have also played their role in it.
Any disproportional increase in current account deficit could adversely affect the status of foreign exchange reserves, which reached as low as $1.3 billion a couple of months ago. Besides this, there is a need to enhance exports to offset the adverse effects of repayment issue.
