|
This week's lowering of the forecast for economic growth during Pakistan's present financial year (July-June) indicates a mounting challenge for the new government, whose ministers finally took oath of their respective offices this week.
According to Pakistan's central bank, economic growth in the present financial year will come down to a range of six to 6.5 per cent, from the government's initial target of 7.2 per cent, mainly because of weaknesses in farm production and large scale manufacturing.
The central bank predicted inflation to remain in the range of eight to nine per cent, significantly above the government's target of 6.5 per cent. Other key indicators which are trailing behind the government's expectations include a current account deficit of six per cent of gross domestic product and a budgetary deficit of 5.2 per cent of gross domestic product.
These numbers are the latest in a series of indications suggesting that all is not well with the Pakistani economy. However, there is a very real possibility that the country's new rulers may exaggerate the scale of the economic slowdown, primarily due to their penchant for trying to put the responsibility of the malaise in the hands of the country's previous rulers. This will be tragic at the very least.
Pakistan's economy faces many challenges given that the country stands among the world community of oil importing economies, whose outlook has suffered at the hands of the sharp rise in global oil prices.
Consequently, Pakistan's expenditure on imports has shot up sharply this year. The rising international oil prices have also brought a major burden for ordinary consumers who are now widely disenchanted against fast growing inflation. The fact that Pakistan's farm sector has suffered from the failure of its last cotton crop, has not helped to compensate for other economic pressures through a rise in agricultural incomes.
However, historically speaking, Pakistan's current challenges are not as acute as the challenging times when the country faced punitive global economic sanctions, just a decade ago, shortly after its maiden nuclear tests.
Those tests in 1998 forced Pakistan to slap a ban on the withdrawal of foreign currencies from domestic banks, which was an action that greatly jeopardised the country's investment climate in the eyes of foreign investors. It took Pakistan a number of years to come out of the fallout from that episode.
Glimmer of hope
Today's Pakistan may be faced with economic challenges but there is also a glimmer of hope coming from dimensions such a significant rise in the country's foreign currency reserves, and overall growth prospects still being better than the 1990s average. In some ways, the oil price situation also offers a bit of an opportunity, thanks to the billions of dollars which have flown in to the Middle East for higher revenue.
The best outcome for the new government will be to try and cash in on that opportunity by setting the basis for attracting new investments from the Arab world. But to do that, the government will have to emerge out of its mindset of playing down the economy's prospects more or less across the board.
In the coming days, the new leaders of Pakistan's latest coalition government will be far better advised to put their heads down and try to come up with new formulas for improving the investment prospects. As a follow up to that outcome will be the matter of selling those new ideas to buyers in the Middle East, all for reviving what for now appears to be a weakening economic and investment prospect.
The writer is a journalist based in Pakistan.
|
