FeaturedNationalVOLUME 15 ISSUE # 08

Deepening Suffering

The government claims to have revived the national economy but the common people have been crushed by rising prices of essentials, electricity, gas, food and medicines. The government’s prime focus is still the opposition and governance and public issues have taken a back seat. It appears the people will have to learn living in pain in the remaining period of the government, which had immensely raised public hopes before the election.

Risks to the economy still persist even after making some harsh adjustments, which have overburdened the common people. Lack of political consensus, instability in prices, rallies by the opposition, rising inflation, low collection of revenue and trade deficit are still major challenges for the economy.

There are some indicators that the economy is heading to a positive direction, but the common people have suffered badly in the process. The government does not hesitate from overburdening the people with price hike. The prices of essentials increase on a daily basis instead of months or years. People are worse off in the first 14 months of the Pakistan Tehreek-i-Insaf (PTI) government of Prime Minister Imran Khan. They have been forced to miss the past Pakistan Muslim League-Nawaz (PML-N) government despite its ills. They cannot read complex economic indicators. They only know their lives have become harder in the PTI government.

On the other hand, Prime Minister Imran Khan has congratulated his economic team for “stabilising the economy” and asked it to focus on creating job opportunities and facilitating investors. There are signs of improvement in the economy and even international organizations admit it. According to Bloomberg, Pakistan stocks trounce the rest of the world in the past three months. Large investors, including mutual funds and insurers, are expected to jump in as double-digit returns from fixed income have begun to ebb away. Pakistan Stock Exchange-100 Index has advanced to the highest level in seven months, after falling to the lowest in almost five years in August, amid attempts by the government to stabilize the economy with a $6 billion loan from the International Monetary Fund after a deficit blowout. At the same time, bond yields have begun to fall after peaking around 14% mid-year, making debt investments less attractive. Foreign investors have bought $64 million of the nation’s stocks this year, set for the first annual inflow since 2014. Their purchases will gather pace February after the nation’s next review by the Financial Action Task Force, it noted.

In another development, Pakistan posted $99 million current account surplus in October after a gap of more than four years, which indicates recovery from long-prevailing deficits but the four-month current account position still showed a deficit of $1.5 billion. The latest data released by the State Bank of Pakistan (SBP) showed the government has succeeded in bringing down the current account deficit. The country’s current account deficit, in the last fiscal year, was $12.75b, which came down 36pc from a record high of $19.9b in FY18. The data for October showed the current account was positive 99m against a net deficit of $1.28b in the same month of the previous fiscal year. During the cumulative July-Oct period, the current account deficit reached $1.474b compared to $5.6b last year. The deficit sharply reduced in the last four months, reflecting significant improvement on the economy’s external front. The details showed the deficit fell drastically due to sharp decrease in imports, which fell to $14.65b from $19b in the same period last fiscal year. However, exports of goods increased to $8.22b compared to $7.9b in the last fiscal year. Subsequently, the trade deficit fell to $6.4b compared to $11b during the period under review.

The foreign direct investment (FDI) in the first four months of the current fiscal year jumped by 238 per cent to $650 million from $192m during the same period last fiscal year, reported the State Bank of Pakistan (SBP). The foreign private investment, which includes portfolio investments, reached $665.7m compared to net outflow during the corresponding period last year. The highest inflows during the period came from Norway reaching $263.7m, followed by $122m from China — the biggest investor in the country particularly due to the ongoing China-Pakistan Economic Corridor. The telecommunications sector emerged as investors’ pick attracting investments worth $267m. The sector has been a prime attraction for foreign investors along with oil and gas exploration and power sectors.

Moreover, foreign investment in both equity market and government security debts has also seen significant increase during the period under review. The latest data released by the SBP shows that foreigners invested over $800m in the market treasury bills. For the first time, the market treasury bills attracted a huge amount and set a new record. High interest rates have also pulled foreign investors to invest in government debts. The yield on government-backed papers is about 13pc which is very high as the dollar depositors get below 3pc in the world. Analysts say that improvement in ease of doing business has increased the foreign investors’ confidence.

It is a fact that past governments failed to make structural changes and improve governance but the PTI government cannot continue to blame them. Consequences of all blunders, mismanagement and inaction of the past governments lie on the table of Prime Minister Imran Khan and he has no option of failure. The situation is not easy to handle. The government is finding it difficult even to foot debt servicing and necessary expenditure and funds for public welfare look impossible at the moment.

Despite some positive signs for the economy, the government’s policies have only hurt the common people. The government aims to introduce more reforms in the next few months. It means there is no prospect for relief for the people anytime soon and they will continue to suffer in years to come.