The federal government disdains and despises the warnings and valuable suggestions of international lending agencies, independent economists and business community to initiate corrective measures to steer the economy out from the state of acute stagnation. The sane advice infuriates the Minister for planning Ahsan Iqbal. In a denial mode he used to claim that the country is making economic gains, economy is stable and the PML-N government will shortly dig the canals for the provision of milk and honey to the people. But the State Bank tells another story that vindicates the analyses of World Bank, International Monetary Fund (IMF), renowned economists and businessmen.
Admitting a tremendous pressure on the external account, Governor State Bank Tariq Bajwa said that Pakistan is facing external financing gap of $ 12 billion, confirming the assessment of economists’ namely Dr Hafiz Pasha, Dr. Shahid Hassan Siddique and Dr. Akmal Hussain. The central Bank Governor gave an in-camera briefing to the National Assembly Standing Committee on finance and revenue. He may have told the parliamentary body the reasons behind the weakening rupee and grave challenges confronting the economy in the months ahead. The decision to hold the meeting without the presence of media was taken suddenly as the SBP did not want to share the negative news with the people. Chances are that the massive trade gape will be filled by using official currency reserves as well resorting to more short term and long term expensive borrowings because the government does not want the foreign exchange reserves to fall below $ 14.6 billion which are sufficient only for six weeks imports.
Acquiring costly loans by the present government has dangerously increased the debt servicing. An IMF delegation visited Pakistan quite recently and asked those who are at the helm of affairs to adopt new legal framework for public finance management. It will be aimed to stop the country from reckless borrowing which the so called financial wizard Ishaq Dar has already done. It will also ensure a strict oversight on the unchecked expenditure. The IMF pushed this demand during talks with the mandarins of finance ministry under the umbrella of Post Program Monitoring (PPM). This proposal of the IMF was not well received by the ruling party leadership and a feeler was released to pro government media that Pakistan is not interested in another IMF program. The IMF position is consistent with that of World Bank which pegged disbursement of $ 400 million loan subject to the approval of the Public Finance Management Bill. The passage of this bill from the present parliment seems unlikely. The present government is reluctant to accept the proposed fiscal discipline as like the previous PPP government it has also violated the borrowing limits set out in the Fiscal Responsibility and Debt limitation Act 2005.
The Lahore Chamber of Commerce and Industry LCCI) has painted a very grim picture of the economy and warned the government that economy is slowly heading towards the point of no return and the decision makers should revisit the economic policies. The LCCI president Malik Tahir Javed decried in a statement that industry is the main victim of deepening economic crisis, whereas rupee depreciation is adding to the economic miseries of the country. He said that heavy loans are obtained from multilateral donors under the tough conditions of enormously raising the energy tariffs which create stagnation in the manufacturing sector resulting in sharp decline in exports. “How can a country take independent decision and its economy can grow when it is carrying a debt burden of over $ 85 billion and utilizing huge part of federal budget on debt servicing , “he remarked. He emphasized drastic changes in the monetary and fiscal policies to give momentum to growth in the agriculture and manufacturing sectors and pleaded for the Turkish model. Malik Tahir Javee also stressed for liberal incentives to boost the exports of textilesS, sports and surgical goods besides light engineering products and rice to narrow the trade gap. It is very pathetic that time is running out but no one is paying attention.