In less than a year into a growth spurt the country encounters powerful imbalances like a decline in the value of the rupee and a rising current account deficit. The Monetary Policing Committee’s explanation is that the pace of the economic recovery has exceeded its expectations. The “robust recovery” in domestic demand, coupled with higher international commodity prices, was leading to a strong pick-up in imports and a rise in the current account deficit. Among the indicators of the robust growth, according to the SBP, are “the most high-frequency domestic demand indicators such as automobiles, POL (petroleum, oil and lubricants) sales, cement sales and electricity generation. The growth is also “mirrored in the strength of imports and tax collections” The strength of imports as opposed to the weakness of exports brought back the current account into deficit in December 2020 that has been climbing ever since, $0.8 billion in July and $1.5bn in August, reflecting both vigorous domestic demand and high global commodity prices.
The current account deficit has also led to the reduction in the value of rupee against the dollar. Reportedly the SBP has ‘thrown’ $1.2 billion into the markets over the last few months to try and shore up the rupee without much success. This is something the PML(N)’s Ishaq Dar has been maligned for by the present government. It remains to be seen how the current account deficit and the fall of the rupee affect the other two elements of macro stability, foreign exchange reserves and public debt.
The way the growth is measured by the elite members of the ‘econocracy’ has been challenged. An alternate view stresses the economic well-being of current and future generations and emphasizes distributional aspects of the growth, its sustainability and inclusiveness as well as improvement of the ecology.
And now the déjà vu. Under Musharraf, the current account ran a surplus in fiscal years 2003 and 2004 as GDP growth charged on. In FY05 it plunged into deficit in three out of four quarters, closing the year at negative $1.5 billion. Then came the first quarter of FY06, in which the deficit soared to $1.5billion again, reaching in three months the same level it had taken 12 months to reach the previous year. Beside what use is growth if it doesn’t considerably add to jobs?