There is a consensus of opinion among economic experts that Pakistan’s economy cannot grow without undertaking long delayed structural reforms. Successive governments in the country have not paid attention to this fundamental task with the result that our economy has become a basket case. We have become debilitatingly dependent on bailouts and doles from the International Monetary Fund (IMF) and friendly countries.

The economy is in a precarious situation today. Pakistan has not faced such unprecedented price hikes as today. Joblessness is on the rise and more than 50 per cent of the population has slipped below the poverty line. The year 2022 ended with a current account deficit of US$17.4 billion and a trade deficit of US$ 44.7 billion. Besides, the country faces a staggering foreign debt servicing requirement of US$20.4 billion.

During the PTI government, the external debt burden increased from US$95.23 billion to US$130.19 billion, showing an increase of US$ 34.9 billion. The PTI government’s glaring failure was that despite huge borrowings, it could not add much to the country’s GDP. The Pakistan Democratic Movement (PDM) is now trying for the resumption of the IMF programme held in abeyance since October 2022. But so far its efforts have borne little fruit. Finance Minister Ishaq Dar committed a blunder by his uncalled for boast and blunder about the value of the rupee, which put off the IMF. He did not take timely and decisive steps for the implementation of agreed policies. He also did not put in place prior action like additional revenue-generating measures, reduction in untargeted subsidies and managing the energy sector issues, especially circular debt. On the other hand, there is an urgent need to secure financial commitments from official partners and friendly countries, which is critical for resumption of the programme and macroeconomic stability.

But the million dollar question is: Even if the IMF programme resumes, will this heal our ailing economy? According to analysts, quick fixes like IMF loans are not an answer to our economic problems which are deep rooted. Reliance on the IMF and bilateral arrangements on the one hand is putting us under monstrous debt burden and on the other compromising our sovereignty—amendments to the State Bank of Pakistan Act, 1956, is a vivid example. For the next four years, our debt-servicing requirement is estimated at US$25.23 billion per annum. This is in addition to the current account deficit, which may rise to US$ 37.5 billion per annum.

These long-term challenges cannot be solved by temporary palliatives like IMF loan packages. Instead, we need to address the fundamental issues ailing our economy. These include low exports, stagnant productivity growth, a skewed taxation system, dwindling state revenue, increasing income gap and wasteful government expenditures. In 2005, Pakistan’s exports accounted for 0.15 per cent of the global exports. In 2019 they amounted to only 0.12pc. This suggests relative productivity stagnation and low scope for future productivity growth.

In the last fiscal year, there was a marked improvement in the country’s export of merchandise and services, rising to $38 billion owing to a global hike in commodity prices and free fall of the rupee. But the trade deficit also widened with imports soaring to $80.51bn owing to higher costs of imported goods.

In the given circumstances, our efforts should be to facilitate the local industry and encourage exports which are among the lowest in the world. Our export sector has also been adversely affected by the government’s ill-advised decision to ban imports of critically needed raw materials. Due to this a large number of industries have closed down and hundreds of thousands have lost their jobs. At the same time, inflation has gone through the roof.

Though the global economy will grow in 2024, our economic difficulties will not go away unless we ensure substantial revenue generation and stop wasteful expenditures drastically. A recent World Bank study says that Pakistan’s economic growth has been stunted by the inability to mobilise all its talents and resources and allocate them to productive uses.

The structural distortions in the economy are responsible for low productivity growth and slow job creation. According to the WB report, the country’s growth prospects are directly associated with the ability of its firms to grow large and productive over time so that they create good job opportunities for the working-age population.We also need to work on the formalization of the economy and focus on financial inclusion. According to an estimate, the size of the informal economy is close to 36%. Surely, more efforts are needed to end the parallel economy through stronger laws and their effective implementation.