As the general elections are approaching fast, the economy of Pakistan could experience a significant decline in its growth rate as, usually; no one in the interim government takes responsibility of the economic affairs. On another note, the International Monetary has expressed concern over widening external and fiscal imbalances, reduction in foreign currency reserves and emerging risks to the financial outlook. The macroeconomic stability, which the government had achieved after entering a three-year $6.64 billion multi-tranche Extended Fund Facility with the IMF, was lost soon after Ishaq Dar left as the finance minister. Now the fund managers have advised the government to refocus on near-term policies to get back to fiscal discipline and minimize the risks of economic lost. There was a need to adopt austerity measures at the higher levels and maintain medium-term debt sustainability, but the government failed on both the accounts. The country’s fiscal deficit is growing and could reach 5.5 percent of the gross domestic product and the current account deficit could cross 4.8 percent of the GDP. It is believed the economic growth rate would stay at 5.6 percent instead of 6 percent projected in the budget. Though the near-term economic growth outlook is favourable, risks to macroeconomic resilience could jeopardize the overall outlook of the economy. When loans are the only option for the government to resolve financial troubles, the jugglery of words would not resolve chronic issues. The fund wants the government to do more, cautioning it on external liabilities, whereas the public sector entities are continuing to incur losses. The government will have to concentrate on debt management to lower fiscal risks.
Experts firmly believe that stimulation of the industrial sector should be main priority of the policymakers instead of foreign loans. The so-called fiscal discipline cannot be strengthened by burdening the nation with more loans and more taxes. The government will also have to stop overspending in non-productive sectors. Besides austerity measures, tax concessions and investment friendly policies need to be implemented. Creating difficulties for imports will create more risks than any benefit as the government had earlier slapped duties on several hundred commodities to curtail volume of exports. As general elections are nearing, a policy to control financial affairs should be devised to thwart any effort by unscrupulous elements to damage the financial discipline. The government should also put a moratorium on seeking further loans and leave such affairs on the next elected government.
