Pakistan’s economic indicators have started showing signs of a turnaround in 14 months of Prime Minister Imran Khan’s government as foreign direct investment, exports and remittances have increased while current account deficit decreased sharply. The country is expected to be among top 20 drivers of growth by 2024, according to estimates by international financial organizations. The forecasts indicate the country is firmly on the path to progress and people will start reaping fruit in few years.
In a series of tweets, Prime Minister Imran Khan shared data of foreign direct investment which has increased by 111.5pc and foreign private investment by 194pc during one year of his rule. The current account deficit was recorded at a 41-month low in September from $1.27 billion to $259 million. The country’s exports surged by 5.9pc while imports declined by 18.6pc in a year. When the PTI government took power, Pakistan had the biggest current account and fiscal deficits of its history. The twin deficits of Pakistan in 2018 stood at $18.25 billion and Rs2.26, respectively. Reposing trust in the government’s economic policies, overseas Pakistanis sent far more remittances as the indicators showed a 17.6pc increase in remittances during September this year.
Pakistan’s trade deficit narrowed by around 35pc in the first quarter (July to September) of the current fiscal year, mainly due to reduction in imports. The country’s trade deficit was recorded at $5.73 billion in July to September of year 2019-2020, as compared to $8.79 billion in the corresponding period last year, showing a reduction of 34.85pc. The latest data by the Pakistan Bureau of Statistics (PBS) shows that trade deficit has shrunk due to a massive reduction in imports of the country.
Pakistan’s imports were recorded at $11.25 billion in the first quarter of the current fiscal year against $14.17 billion in the same period of the previous year, showing a reduction of 20.59pc. However, the country’s exports have recorded minor growth of 2.75pc in the period under review. Pakistan exported goods worth $5.52 billion in the July-September period. Imports have started declining due to the imposition of regulatory duties on luxury items and automobiles. However, textile exports have remained at the level of the previous year. The government has provided several incentives to five exports-oriented sectors, including textile, to enhance exports. It had depreciated the currency and reduced the prices of electricity and gas but it failed to achieve desired results.
According to fresh data, Pakistan’s exports have grown by 2.67pc and reached $1.77 billion in the month of September, from $1.72 billion in September 2018. However, imports have declined by 13.9pc and reached $3.79 billion in September 2019, from $4.4 billion in the same period last year. The trade deficit was recorded at $2.11 billion in September, as against $2.67 billion in the same month in 2018, showing a reduction of 24.58pc.
The government’s claim of an economic turnaround is also supported by a recent report in Bloomberg, which quoting the International Monetary Fund (IMF), said Pakistan was anticipated to be among top 20 drivers of growth by 2024. The forecast also includes China, India, Thailand, Malaysia, Japan, South Korea, Philippines and Bangladesh from Asian countries. China’s growth rate is expected to continue to slow, and will be a smaller driver to global GDP growth in the near term. China’s share of global GDP growth is expected to fall from 32.7pc in 2018-2019 to 28.3pc by 2024, a relatively steep 4.4 percentage point reduction.
Weaker global growth, expected to fall to 3pc this year and the slowest since the global financial crisis, will affect 90pc of the world, according to estimates released by the IMF. It said new growth engines among top 20 countries in five years will include Turkey, Mexico, Pakistan and Saudi Arabia, while Spain, Poland, Canada and Vietnam drop out of the first 20. The U.S., while still expected to contribute a sizable portion to world growth, is projected to fall to third place, after India. America’s share of global growth is expected to slip from 13.8pc to 9.2pc by 2024, while India’s share is projected to rise to 15.5pc and eclipse the U.S. over the five-year period. Indonesia will remain in the fourth spot as its economy is expected to have a 3.7pc growth share in 2024, a slight downward adjustment from 3.9pc in 2019. The U.K. will see its importance wane amid Brexit as its economy drops from ninth as a share of world growth in 2019, to 13th. Although world GDP growth attributable to Russia is at 2pc now and expected to stay there in five years, yet the country is likely to displace Japan as the number five growth contributor. Japan will fall to ninth spot by 2024. Brazil is projected to move up from No. 11 to No. 6. Germany’s share of growth is expected to remain at 1.6pc and 7th on the list.
According to a recent World Bank report, titled “South Asia Focus: Making (De)centralisation Work,” Pakistan’s growth is expected to recover slowly to 3pc in fiscal year 2021, as macroeconomic conditions improved and external demand picked up on the back of structural reforms and increased competitiveness. Inflation is expected to increase in fiscal year 2020 to 13pc but it will start declining afterwards. The current account deficit is also expected to decline to 2.6pc of GDP in fiscal year 2020 and further to 2.2pc in fiscal year 2021, as increased exchange-rate flexibility would support a modest recovery in exports and rationalisation of imports, the World Bank noted.
The Pakistan rupee has also stabilised after losing almost a third of its value in a year as it hit the highest level of FY 2019-20 against the US dollar in the interbank market in October. The Pakistani currency rose to a four-month high against the US dollar by gaining another 8 paisa in the interbank market in the middle of October.
The indicators prove Pakistan is heading to progress and prosperity after a year of harsh measures. However, people will have to wait for at least three years to benefit from fruits of an economic revival. It is a long time and will not benefit the government in the next election. It will have to check prices of essentials, electricity and gas to provide meaningful relief to the people for any chance in the next polls.