EDITORIAL: It is undoubtedly good news that private sector credit drawdown reached a record high of Rs 911 billion in July-March 11, 2002, compared to Rs 357 billion in the same period last year. But now that the interest rate environment is turning hawkish again, the government must already be concerned about maintaining this growth momentum. Especially since there is already enough to keep the whole economy in suspense.
The Expanded Financing Facility (EFF) with the International Monetary Fund (IMF) is in limbo again, there is talk of more across-the-board taxes that will further eat into working class incomes, and the Prime Minister’s ‘relief package’ Minister threatens to put more pressure on the current account than he can bear. Therefore, as the Ministry of Finance looks for ways to keep credit pipelines open to the private sector, it would not be a bad idea to think about (finally) plugging some leaks in the national reserves as well.
It is evident that the way State-owned enterprises (SOEs) are bleeding hundreds of billions of rupees every year places an unsustainable burden on the economic health of the country that threatens to lead to a national security emergency.
And since we are talking about the private sector here, and everyone knows what the only viable solution to the problems of public companies is, then why not work on a workable privatization plan, at least for the worst of them? , then channel the money saved for development and debt relief? Otherwise, with the way the rupee is depreciating, the deficit is widening, prices are rising, Pakistan risks being doomed to an environment of low productivity, low growth, and therefore very high flatation; this is the worst time to also be condemned to the classic debt trap.
It is true that many things are simply beyond our control. The surge in commodity prices first triggered by the post-lockdown global “reopening” and then accelerated by the Russian invasion of Ukraine has upended economies around the world; and Pakistan is no exception. But it is also true that much is not beyond our control. The manipulation on the local market, of products that are produced and not imported, by mafia groups or intermediaries that the Prime Minister swore to hunt down a long time ago, is indeed the business of the government and its responsibility. As is, recklessly pumping money into public relief programs, no matter how well intentioned, when there isn’t enough in the kitty and much of it has to be borrowed, and that too at rates students. This only creates the classic inflationary scenario of too much money for too few goods, since there is no corresponding increase in production.
Pakistan desperately needs policies that can build a strong workforce capable of producing exportable goods. And since remittances make up a large part of our foreign exchange reserves – and in fact save the day for the current account, insofar as circumstances permit – there is an equally desperate need for a workforce. capable of working and earning abroad and sending back more money. residence.
The private sector must lead the charge if the economy is to rebound, no doubt, but the overall contractionary environment brings strong headwinds. That’s why it’s important to work with the Fund now, not to put a wrench in the EFF every time politics gets too hot. The bailout program is virtually frozen precisely because the government’s “one step forward, two steps back” movement shows it is reacting even more than it is acting. It says a lot that nearly four years into the current administration, no one is quite sure whether he will tighten fiscal policy, as demanded by the IMF, or ease it, as he wants. And nothing scares off the private sector, or any other breed of investors for that matter, like confusion and lack of direction.
It is hoped that the government will take all stakeholders on board and come up with a serious strategy, to avoid the debt trap that we may find ourselves in.
Copyright Business Recorder, 2022