An Amplified Economy
A significant reduction in the current account deficit is a positive sign, but not at all an achievement to be satisfied with. The drop needs to be sustained, but the critical question is: at what cost?
Securing a saving by putting the engine to a screeching halt may not be an ideal course for an economy the size of Pakistan’s. It should not be a source of celebration, but introspection and correction.
Remittances sent by Pakistanis working abroad were almost two per cent down in the first four months of the current year. This should be a foremost concern for the government that has been claiming its significant political base in the overseas constituency.
As confirmed by the State Bank of Pakistan, the private sector credit also fell by Rs4.1 billion during the first four months of the current fiscal year compared to an expansion of Rs223.1bn during the same period last year “on account of slowing economic activity”.
Some positive signs on the fiscal side were mostly because of one-off inflows from cellular companies and central bank profits; otherwise, the revenue machinery lagged behind its target by almost 170bn during July-October. Inflation is officially forecast to remain in double digits, at least during the current year.
The flow of imports (in dollar terms) declined by more than 19pc in July-October, helping contract the trade deficit by almost 33.5pc. This is a good sign, indeed, as being celebrated by the prime minister and his economic team.
This should be a cause of concern for all Pakistanis in general and the PTI government in particular because agriculture and construction have been on its top priority. The government has been talking about reviving economic growth primarily through these two sectors.
In a positive sign, imports of fertilizers and insecticides dropped by 15pc to 25pc, partly compensated by an increase of around 15pc in domestic production of fertilizers in the first three months of the current fiscal year.
Imports of the metal group fell by 21pc in the four months. Gold imports were down 7pc, iron and steel 38pc, aluminum, etc. 40pc and all other metal and articles by 10pc.
This reinforces the view that the construction and the related 40-something industries have gone into recession. Things will become clearer when we look at the large-scale manufacturing data of domestic industries in the coming paragraphs.
To sum up, a couple of good indicators should at best be viewed as a few early positive signs towards a long, arduous journey to economic revival. False hopes could be as dangerous as an actual economic downturn. It is better to manage public expectations rather than ballooning artificial optimism.