With the government and Opposition fighting over power and pelf, the economic situation is deteriorating with each passing day. All sectors of the economy are in a state of limbo. According to a report, large-scale manufacturing contracted by 7.75pc in October. This was the second consecutive month this year when a negative growth rate was recorded, according to data released by the Pakistan Bureau of Statistics. There was a negative growth of 2.27pc in September on a year-on-year basis, compared to a sluggish growth of 0.30pc in August and a negative growth of 1.67pc in July.

The main contributors to the economic slowdown in October were automobiles (down 30.56pc), cotton yarn (27.04pc), cotton cloth (11.91pc), garments (34.14pc), petroleum products (15.04pc), fertilisers (9.80pc), cement (10.48pc), and iron & steel (8.45pc). In October 2022, the textile sector declined, shrinking by 24.62pc over the previous year. It is estimated that the second quarter will be more difficult owing to suspension of gas supplies to industrial units in winter. The major sufferers are export industries. It is feared that the economic slowdown may take a disastrous turn in the coming months.

There is little doubt that the economy is sinking day by day. But the present government has not shown the seriousness the situation demands. It is still thinking in terms of reducing energy supplies and cutting imports further which will greatly impact industrial productivity. The shortage of raw material means that factories will have no option but to shut down, throwing millions of workers out of job.

Recently, the State Bank of Pakistan put restrictions on dollar payment for anything imported from abroad — even goods that have already landed at our ports and are incurring demurrages. In this context, manufacturers have warned of a looming shortage of essential goods in the domestic markets soon.

To add to Pakistan’s economic woes, remittances are also continuously falling because there is a big difference between the official exchange rate and the prevailing market rate. Global economic conditions are also unfavourable for Pakistan. No investment is coming because interest rates in developed countries have risen. Combined with falling exports, slowing manufacturing activity and lower remittances, the situation takes the form of insurmountable economic challenges for the government.

The most serious threat is that of mass unemployment which may lead to social unrest and public dissatisfaction. It is time the government woke up from its stupor and prepared short and long term plans for economic revival. But it is clueless as to what to do to reverse the continuous economic decline.

In the given circumstances, the IMF is the only ray of hope but the response from the world body is lukewarm. Pakistan’s financial managers were supposed to meet IMF officials in the last week of October to begin negotiations on the ninth review of the $7 billion loan programme. But the highly-anticipated meeting was delayed more than once due to the yawning gap between the fiscal estimates of the finance ministry and the IMF.

One way out of the present crisis is for the government to cut expenditures, gradually reduce untargeted subsidies and follow a strict regime of austerity in all sectors of the economy. Instead of taking measures that can, at best, provide short-term relief to a handful of sectors, the policymakers must concentrate on improving the business climate that can benefit all sections of the economy.

At present businesses are overly burdened with a slew of regulatory restrictions, endless red tape and outdated policies which discourage growth and investment. According to experts, the oil refining industry is a prime example of how excessive regulations and the absence of favourable policies suppress development. Pakistan hasn’t seen any major investment in the oil refining industry for years. Even with the rising consumption of petrol and diesel, the oil refining capacity has remained limited.

Above all, a beginning should be made towards addressing the structural issues which stand in the way of sustainable economic growth such as a skewed taxation system, loss-making state enterprises and stifling bureaucratic control of large segments of the economy. Land reforms are also an urgent need to unlock the productive potential of the agricultural sector.

It is time for the government to put its act together and launch an emergency plan to avert an impending collapse of the economy.