Prime Minister Shehbaz Sharif has said that Pakistan has achieved economic stability, and its financial indicators were positive and the country was moving forward to economic growth, while addressing MPAs and MNAs in Jahanian at the residence of MNA Ch Iftikhar Nazir. That forex reserves have improved, and inflation has come down is undeniable. Equally undeniable is that growth has not picked up. The latest large-scale manufacturing figures do not show any growth occurring, which means that industrial activity is yet to pick up. Perhaps one reason that the fall in inflation has not been noticed is that incomes have not increased. That will not happen without increasing growth.
Mr Sharif is taking political credit for what benefit has happened, and is talking up the economy. However, he is working against a legacy of stimulated growth, which has led to collapse, followed by yet another recourse to the International Monetary Fund, which has set stringent conditions for its loans. There is a fear among business owners and managers that there will be another collapse, and the country will once again find itself on the edge of default and obliged to seek IMF help, agreeing in its panic to conditions that are harsh for the people while not positioning the country on a growth path. The IMF has perhaps secured its own loans against default, but it has not developed a path where the economy will get out of the debt trap it is in. The path to economic growth it proposes, requires a large trade surplus, which can only be exported by greater imports. The IMF’s prescriptions do not seem to provide for that, apart from pious exhortations.
Another problem getting on the growth path is the recent flooding. Floods come every year, and they are going to cause more damage with time. The government also needs to review the current growth model, because it is likelier than not that growth will be eaten away first by flood destruction, and then by reconstruction. That leads to another reason for caution: external shocks. Improvement in indicators can be ascribed to the softness of global oil prices; growth would depend on demand abroad, which is presently weak. Neither are in the government’s control. There are other challenges, such as rising food imports, thus making the government realize that it will never be able to relax.
