Vulnerability of economy increasing without urgent reforms
The best way to treat good advice from global financial experts is to ignore it. That is the alarming approach of our economic wizards, who despite repeated counsel, forewarnings and admonitions by international bodies, and ignoring the stark ground realities, seem set on their profligate and wayward ways. Fiscal discipline and austere measures as practiced by super-bureaucrat Ghulam Ishaque Khan are not their forte. But the margin of error between financial salvation and insolvency is fast diminishing and according to a World Bank report released Thursday, the country will have to get its economic act together quickly, as the safety nets providing a buffer or cushion are no longer there.
Specific red flags include, mounting short –term foreign debt, $5.8 billion in just two years, massive fiscal deficit and current account deficit (jumped 112 percent to $3.5 billion in the first quarter), lower than expected economic growth, and the ‘imbalances ‘will, become unsustainable in the absence of timely corrective policy measures’. Total disbursements of $10.1 billion from commercial banks last fiscal year, a budgetary deficit of Rs.2.2 trillion in 2017-18 instead of the optimistic official Rs.1.5 trillion, a 37.1 percent gap in Imports-Exports during July-September of $7.2 billion, combined with minimal forex reserves and an over-valued but weak rupee, make the economy extremely vulnerable, and even an anticipated increase in remittances and Foreign Direct Investment, cannot make up for the yawning deficits.
This leads to the economic equivalent of ‘do more’, that is, devalue the currency, which creates its own inflationary pressure(6 percent in 2017-18) and enhanced debt financing cost and, as collateral damage, reduced funding for social and human development. Some positives are a GDP growth of 5.5 and 5.8 percent for this and next fiscal year, and industrial growth of 7 percent, while under-performing agriculture (2.9 percent) and services sector (5.8 percent) can be jacked up with sound policies.
The ‘absconding’ Finance Minister, responsible for most of the economic mayhem, is otherwise judicially entangled, and now supposedly also needs medical treatment. But the ridiculous notion of resignation does not enter his head, further compounding the crisis.
