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Pakistan’s Sticky Wicket
As the subcontinent debates whether Pakistani Prime Minister Imran Khan can again demonstrate his well-known kaptaani élan to pull his country out of the crossfire of fundamentalism, terrorism and problems of development, one should not disregard that it is the mounting burden of fiscal mismanagement, among other factors, that has rendered various pro-poor strategies inert. Choosing the right options for fiscal management will be the most pressing policy decision facing him.
Imran Khan will lead Pakistan at an unenviable time in its history, perhaps more so than ever before. The country faces a balance of payments (BoP) crisis, increasing budget deficit, spiralling imports, and declining foreign currency reserves and the Pakistani rupee (PKR) has been devalued three times since December 2017. The economy needs an urgent bailout; the United States (US) is clamping hard on tackling terrorism and its social sectors are in dire need of a transformation. Inclusive growth and fiscal discipline have assumed grave importance at a time when its macroeconomic indicators are floundering and the public sector enterprises, bereft of the promised restructuring, continue to bleed. The time has come for desperate action, perhaps another bailout since the last one of $6.6 billion from the International Monetary Fund (IMF) in 2013. Jailing former Prime Minister Nawaz Sharif to ensure a Pakistan Muslim League (Nawaz) (PML[N]) defeat has not helped the political situation to revive. There are hectic debates on the army’s role in an election, which by some accounts has been neither free nor fair. The challenges before Khan are many—political, social, economic, and diplomatic, particularly peace with India, are probably a few to mention.
On the economy front it is a critical time for Pakistan, despite the optimism exhibited during the budget earlier this year. In his annual budget speech for 2018–19, the finance minister, Miftah Ismail, declared that since the PML(N) government took over in 2013, the projected gross domestic product (GDP) growth rate was at 5.8%, the highest in the last 13 years, from 2.8% in the preceding regime; the tax to GDP ratio would increase to 13.2% in 2018–19; the foreign direct investment has already increased to $2.7 billion in the financial year (FY 2017) from $1.3 billion in 2013 and foreign exchange reserves stood at $11 billion. A total of $223 billion was invested in the economy from both domestic and foreign sources over the five years as compared to $140 billion during 2008–13. He claimed that in the past five years PML(N) had reduced average inflation to 3.8% from 12% and food inflation to 2%; and cut back on the 16 to 18 hours of load-shedding with increased power generation.
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