The Ministry of Finance and the finance minister have expressed confidence that the economy – hit by a balance of payments crisis, as well as the Covid pandemic – may be recovering. To prove his point, Finance Minister Hafeez Sheikh has pointed to the growth in the current account and the surplus seen in it as well as an improvement in manufacturing and the growth of larger manufacturing units over the past year. This obviously is good news for Pakistan. But at the same time, we need to consider the matter a little more carefully. In the first place, Pakistan remains under the tight control of the IMF, given the loan it has taken from the body and the conditionalities under which this was done. The situation means the country has very little margin within which to move, and less scope to give any kind of relief to people suffering as a result of the pandemic and the joblessness, the closure of industry etc. The IMF may need to be convinced to run more welfare packages at the moment rather than focus only on the overall financial account of the country.
It is also true that, while the current account is in surplus for the first time in many years, the overall finance account of the country is in deficit. There is also an agricultural crisis, with Pakistan forced to import items it once exported, including wheat and sugar. This is not good news for a country largely dependent on its agricultural produce. At the same time, the growth in manufacturing that we have seen has come mainly in a few primary sectors, including textiles. Analysts suggest that one of the reasons for this growth may be the collapse of the Indian manufacturing sector as a result of the coronavirus. This gap in the provision of textile supplies from India has meant Pakistan can move into the space that has opened up. But the focus must be on retaining this hold after the Covid-19 crisis is over. Whether Pakistan can do this is something that will have to be looked at with some care.
At the same time, there’s also the issue of tax collection. While prices have gone up, and taxation, especially indirect taxation, has risen sharply, this is not reflected in the collections made by the FBR. Quite clearly, the country needs the resources in order to manage its economy and find the money it requires to benefit people. The improvements in the various economic sectors are excellent news, but alone they’re not sufficient. And the overall picture also needs to be taken into account when making any kind of assessment.