Dwindling growth
It ought to worry the government that the World Bank has just revised Pakistan’s growth projection for this year further down to negative 2.6 percent. It was just this April when the International Monetary Fund (IMF) estimated the figure to settle somewhere around negative 1.5 percent, which sent shockwaves through the economy. At this pace it’s anybody’s guess just where the economy is really headed, given that the number of new cases is rising very fast and another lockdown could well be needed rather soon. If this is what the economy can be reduced to in a matter of only three and a half months, it’s frightening to even imagine what might happen if this pandemic lasts for a couple of years before a vaccine is developed.
Yet it’s not as if Pakistan is the only country in the world facing such a situation. We are at a unique moment in history when almost all countries are about to register zero or negative growth. Pakistan’s problem is made worse, however, because of its huge debt and large population; which also means that a very large number of people live either at or below the poverty line. That is why the lockdown was such a failure. And it’s not immediately clear what can be done to improve the economy. Tax revenue is down for very obvious reasons, trade is reduced to a trickle and remittances are also suffering. Already we are borrowing way too much just to stay afloat. Now, unless here’s a substantial debt write off, and soon because the longer it takes the more will be needed, and we are able to secure yet more funding on top of everything else, the economy could be in for an unprecedented battering. If things are not handled in time, unemployment and increasing poverty could snowball in the not-too-distant future.
The government’s own growth estimates don’t exactly match those of international financial institutions (IFIs). While admitting that we will be in negative territory for the first time in many decades, the government expects the final figure to be something like negative 0.38 percent. There’s no way of knowing which is more likely to be true just yet, but it does help to remember that hardly ever has any of Pakistan’s growth, revenue or expenditure figures ever matched its budgeted estimates. So if the past is any guide, and there’s no reason it shouldn’t be, then there’s a good chance that the finance ministry is groping in the dark and hoping to stumble upon some sort of solution in the next few meetings with the IMF. And till it figures something out, growth is going to remain a problem.
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