Pakistan’s growth figures for the financial year of 2022-2023 make for grim reading. The average per capita income in dollars fell from $1,766 to $1,568 in FY23. With the high levels of inflation and devaluation of the Pakistani Rupee, this does not come as a surprise.
What has been surprising so far has been the PDM alliance’s poor performance in all matters related to the economy. The direction that the current economic managers of the country want to take the economy is not clear at all. On one hand, there is the stated urgency to reenter the IMF programme, while on the other, everyone from the Finance Minister to other internal stakeholders is seen dragging their feet over this important issue.
On the other side, most sectors are suffering through the government’s policy of attrition in its attempts to normalise the current account balance. This allows for some breathing room through a cutdown in imports and has worked in saving us from default, but the toll it has taken on the economy means that we need to head towards a recovery soon, or risk seeing even more reduction in production and economic activity.
The only way to do this would be a situation where Pakistan has a higher level of foreign exchange reserves and production can resume with room for both internal economic activity and export revenue generation, which can potentially lead to a recovery in foreign exchange reserves. A healthy economy also leads to other avenues for injection such as a rise in remittances and investment.
The past year has seen stagnancy and inflation, which has in many ways saved the economy from total collapse, but this model is not sustainable. In the long run, attrition only causes more problems, and the high levels of inflation on their own can lead to an even lower average income than we currently have. It is time for the Finance Ministry to seek a way out of this crisis.