Someone mentioned that Pakistan's economy is doing better than it was during Musharaff's era. I find that interesting but then upon researching I found out that people tend to take one economic KPI and consider that as the indicator for the overall economy of the country.
So apparently even if one KPI is doing good then the entire economy is doing great. The indicator mostly used these days is the current account which no doubt has been wonderful. However, the economy as a whole is a lot more than just the current account and our PTI fans need to understand that. Though I don't blame the PTI fans who are going around from forum to forum and thread to thread boasting about how the economy has taken a turn for the better is on the right track as this is the exact statement that was made by our very own PM based purely on the shrinking current account deficit.
I've not read the details but I'm sure some of our lovely PTI fans can shine some light onto the reason behind the shrinking current account deficit because obviously that makes a huge impact as well. Have we started exporting more? Have imports decreased? Have the remittances increased? Has the currency devaluation had an impact?
Even though Khan Saab says the economy is heading in the right direction, The IMF thinks rather differently. he IMF has projected that Pakistan’s economy will shrink in 2020, with a negative growth rate of 1.5 per cent. A drastic reduction is also expected in remittances from the Gulf and it is unlikely that investment will increase any time soon.
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https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020)
Moreover, even though we continue to have a capital account surplus and the economy is heading in the right direction and everything is perfect we had to borrow $1.4mn under RFI from IMF. The borrowing has continued under PTI as it did under the previous governments. My question to our resident economic experts and to Khan Saab is: What is the economic impact of continued borrowing without an increase in productivity?
Khan Saab and his followers, as mentioned earlier as well, tend to ignore all other economic KPI's. One might ask Khan Saab and our amazingly intellectual PTI fans here regarding GDP and what the expected growth in GDP per Capita is expected to be since our economy has taken a turn for the better. In case you're not aware latest estimates point out that when Khan took over GDP growth was around 5.5% and is now expected to be at 2.4%.
What about unemployment? These numbers are hardly ever shared by the government. Where do we stand on budget deficit? What is our tax to GDP ratio and is it increasing? What is our borrowing to GDP ratio and is that increasing? Where do our foreign exchange reserves stand? What is our income per capita? What percentage of people fall below the poverty line?
Looking at Pre-Covid economic situation of Pakistan, it is obvious to anyone with even the most basic knowledge of economics that the reduction in the current account deficit was a result of import compression and steep depreciation of the Pakistani Rupee. So even though we were able to put in measures to reduce the current account deficit these measures have major impacts on economic growth.
Pakistan's GDP growth was, as mentioned above, around 5.5% around the time when Khan Saab took over, the following year it dropped to 3.3% and as per IMF projections is expected to fall to 2.4% in FY20.
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https://www.brecorder.com/2019/11/19/545649/lower-gdp-growth-rate-in-2018-19/)
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https://www.dawn.com/news/1527162/world-bank-revises-pakistans-growth-projections-downward)
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https://www.thenews.com.pk/print/60...ts-low-gdp-growth-high-inflation-unemployment)
The increase in foreign exchange reserves (after the IMF approved the EFF programme in 2019) was largely based on borrowed money, such as bailout loans from China, Saudi Arabia and the UAE.Despite a nearly 30 percent depreciation in the value of the Pakistani Rupee, exports increased only marginally (2.2%) whereas inflation we have seen a steady increase in inflation.
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https://www.orfonline.org/research/covid19-and-pakistan-the-economic-fallout-67296/#_ednref17)
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http://www.pbs.gov.pk/sites/default...ices/nb/2019/cpi_review_september_nb_2019.pdf)
As part of the IMF agreement and in order to control inflation SBP has also been steadily increasing interest rates from 6.5 during PML tenure to 13.25% in July 2019. The benefit from this was the inflow of funds into Pakistan in the form of treasury bond purchases however, I would like to know how we stand on this now after COVID.
Nonetheless, high interest rates and taxation coupled with the devaluation of the PKR has resulted in a decline in industrial production. The production is down by 43 percent of cars; 19 percent of motorcycles; petroleum products by 14 percent; cigarettes by 36 percent; steel products by 30 percent; chemicals by 20 percent and so on. In fact, out of the 112 product lines covered by the QIM, there has been a decline in output in 65 lines
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http://epaper.brecorder.com/2019/12/24/18-page/816709-news.html)
Since the Imran Khan government came into office in 2018, the fall in growth coupled with high food prices and rising unemployment had caused almost 10 percent of the population to slip below the poverty line. Pakistan’s debt has increased by almost 40 percent since Imran Khan assumed office. Public debt as a percentage of revenue went up from 447 percent to 667 percent in the span of one year, and debt servicing as a percentage of revenue increased from 37.3 percent to 62.5 percent between FY18 and FY19.
Going forward IMF is projecting a -1.5% growth in GDP in FY20. This is the first time in the history of Pakistan that its economy will contract. Morever, unemployment is projected to go to 16%. Nearly 15–20 million people could slip into poverty, and the total number of poor is likely to cross the 100 million mark, i.e. almost 50 percent of the population.
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http://epaper.brecorder.com/2020/04/14/14-page/833587-news.html)
Laiken bhaiyo ghabrana nahi hai! Current account deficit is shrinking to the economy is going in the right direction!
