NationalVOLUME 17 ISSUE # 10

New Year, old challenges

A weak economy, political instability, bad governance and terrorism will be Pakistan’s biggest challenges in the New Year. Though terrorism has largely been defeated, yet recent incidents show it could overshadow other national challenges, if not tackled seriously.

According to ministers, millions of dollars have been provided to terrorists by enemies to create unrest in Pakistan. Their main target is to fan sectarian strife in the country. As the Taliban have taken over Afghanistan, militants opposed to them can target Pakistan, besides creating unrest in Afghanistan. The Pakistan Tehreek-i-Insaf (PTI) government claims to have put the country on the right track in three years in power, but rising prices and unemployment have overburdened the common people. The opposition sees worsening of all economic and social indicators and warns the coming months would be even tougher. According to the government, it has stabilised the economy after inheriting the worst external crises and managed the biggest global COVID-19 threat by successfully balancing lives and livelihoods.

In its recent report, the ministry of finance estimated GDP growth at around 5pc during the first five months of the current fiscal year 2021-22, despite inflationary pressures and consequent tightening of policies. However, it said inflation may ease out in the coming months due to the declining commodity prices in the global market. In addition, relief may also come from continuous government efforts to soften food prices in the local markets by following appropriate fiscal and monetary policies.

The forecast is based on observed favourable movements in macroeconomic high frequency indicators such as growth in LSM, recovery in Pakistan’s main trading partners and strong growth in imports of capital goods. The momentum in the economic dynamism observed in recent months supported economic activity in November. According to balance of payment data, exports of goods and services increased by around 13pc in November as compared to October. They have now settled well above the $3 billion mark and are expected to climb further in the coming months so as to reach a new higher level. However, imports may settle at lower levels gradually in the coming months, it predicted. “Imports are indeed expected to react to higher domestic interest rates, given the historically observed negative interest rate effect on import demand.”

On the other hand, Pakistan’s current account recorded a deficit of $7 billion in the first five months (July to November) of the current fiscal year, mainly on account of increasing imports, the State Bank of Pakistan (SBP) data showed. At $1.91b, November saw the highest monthly current account deficit since July 2018, when it reached $2.1b. This was the year when the country faced a record $20b current account deficit. However, the finance ministry projected imports might settle at lower levels gradually in the coming months. Imports are indeed expected to react to higher domestic interest rates, given the historically observed negative interest rate effect on import demand. The government continues to implement measures to curb unnecessary imports and to supply domestic alternatives in some markets, especially food products. Also, the baseline scenario is based on a downward correction of international commodity prices. The report added that on the basis of these events, the trade deficit will stabilise in the coming months. The expected developments in export and import activities imply that the trade balance may gradually improve in coming months and settle down at significantly lower levels in the second half of the current fiscal. Assuming stable remittance inflows, the expected improvement in the trade balance will be reflected in declining current account deficits, such that these deficits remain manageable and finance-able, the ministry hoped. Foreign exchange reserves held by the central bank also fell by 7pc in November, indicating lower inflows. It is clear that the economy will be the biggest issue of the country and its people.

Terrorism has increased in Pakistan, especially in Balochistan and Khyber Pakhtunkhwa, in recent weeks after Pakistan played a pivotal role in intra-Afghan dialogue, which was appreciated by the world community. However, Pakistan could see a surge in terror incidents, because all anti-Taliban militants have joined hands and they can attack Pakistan and Afghanistan. Pakistan’s relationship with China is evolving into a strong economic partnership as the second phase of the China Pakistan Economic Corridor (CPEC) has started.

On the other hand, critics say the mismanagement of national affairs has increased the woes of the masses manifold. They say Pakistan’s economy is the worst in the country’s history with foreign policy failures from Kashmir to Saudi Arabia, democracy and human rights suffering and unemployment at an all-time high.

It is a fact the PTI government has brought unprecedented miseries to the common people. Inflation has hit a five-year high. Prices of vegetables, fruits and meat have posted a persistent increase in both urban and rural areas. The government increases prices of petroleum products almost fortnightly. Power and gas tariffs have also been revised upward. The rupee has depreciated by over 40pc against the dollar, which skyrocketed prices of all essentials. The period was quite difficult for the government due to an economic crisis it had inherited from the previous regime but it cannot continue to blame the past rulers.

Critics say the PTI has been a total disaster for the country and it failed on all fronts. It is a fact that the government’s performance has been below par so far. It failed to stabilise prices and provide jobs to people, which is a yardstick to assess the performance of a government all over the world. According to the Asian Development Bank (ADB), 2.3 million young people in Pakistan have lost their jobs during the six-month lockdown period. According to the government’s own estimate, at least another 10 million people are expected to slip below the poverty line as a consequence of the coronavirus pandemic. “The Covid-19 is expected to have a negative impact on Pakistan’s economy, and the number of people living below the poverty line may rise from the existing figure of 50 million to 60m,” the Economic Survey 2019-20 said.

Besides the economy, terrorism and governance, political instability will also continue to haunt the country in the coming months. The government and the opposition will have to initiate talks to resolve their issues, so that the government could concentrate on public problems.