Grim Economic Scenario Dodges Pakistan Into 2023

Pakistan ends the year 2022 and hurtles into 2023 with an economy that is arguably facing its worst crisis since its birth, yielding no sign, internal or external, of an early improvement.

The year saw its exports falling, its imports spiking, high double-digit inflation and its foreign exchange reserves held by the State Bank of Pakistan (SBP) continuing their declining spree, plunging by $584 million to reach $6.1 billion. According to the central bank’s data, this is the lowest level of reserves since April 2014. Pakistan is worse off even among economies currently doing badly and has reserves only to last 30 days’ imports.

It also saw multiple postponements by the International Monetary Fund (IMF) to evaluate and disburse USD 1.6 billion, which is only a fraction of the six billion Pakistan has been seeking for many months. It now says the figure is well-nigh inadequate and needs USD 33 billion to tide over its current economic crisis.

Adding to the woes of successive governments in Islamabad, the IMF remains cold to the urgent needs of Pakistan even as it stipulates – and secures – the imposition of stringent measures to make the economic recovery. These measures, especially rising fuel prices, have contributed to high inflation and politically, have proved the most unpopular. 

Amidst all this, while the Shehbaz Sharif Government makes tall claims and promises, the Imran Khan-led opposition that had contributed in no mean terms to the worsening of the situation, baits the government with anti-American and anti-West rhetoric, knowing well the money would have to come only from them. Such rhetoric is the staple of Pakistan’s politics.

The country is witnessing a zero-sum political game wherein Khan calls the government ‘imported’, alluding to the United States conspiracy’ that he alleges pushed him out of power on April 2022.  Khan ended the year painting a grim economic scenario – except that he posed as the only messiah who can resolve the issues.

His own four-year record, however, was just the opposite. He delayed going to the IMF and banked hopefully on China, which did not oblige and the Saudi royalty whom he successfully managed to annoy, enough to demand a loan back and went back on concessional energy supplies. The UAE money has not made a significant change in stabilising a fretful economy. He also bit the military hand, that of the former army chief, Gen. Qamar Javed Bajwa, his principal benefactor, who had lobbied for funds with some success.

There are more political ironies in Pakistan that are indeed laughable, except for the misery suffered by its hapless population. Foreign Minister Bilawal Bhutto Zardari in early December positioned his country as a foreign investors’ haven when his hosts – be they the US that he visited twice and other global capitals – know well that his government has been desperate for funds and worse, unable to either ensure political stability and security from terror outfits – two of the preconditions for any investor.

When the Pakistani rupee dips, the media foments public sentiment of the dollar being the culprit and when the rupee recovers a bit, the event is painted in patriotic colours, as if it has vanquished the poor dollar.

In yet another irony, Goldman Sachs has in a recent forecast predicted Pakistan’s economy emerging as one of the top five global economies by the year 2075. Besides the fact that it is 52 years away, the forecast does not count political inability, narrowing economic base, falling foreign funds from those working abroad and dismal past performance with global investors. 

A viewpoint by Ahamad Faruuqi (Dawn, December 28, 2022), says that forecasts decades away, that ignore the ground situation in any country are counter-productive. Besides these concrete failures and shortcomings, Goldman Sachs experts ignore factors like rampant militancy or natural calamities like the floods that devastated vast areas during 2022.  

One such forecast by the United States National Economic Advisor Walt Rostov had positioned Pakistan’s economy at the top in 1961, till the latter waged a war with India in 1965 “which unleashed a political upheaval that led to the imposition of a second martial law and in 1971 found a province in the east separate to emerge as Bangladesh. In his grim forecast for 2023, Nadal Husain (Dawn, December 30, 2022) says: “With no let-up in the present situation in sight, it is time people braced themselves for a tougher year ahead than the one they just endured. Next year we could see inflation entrenched further and the economy trek toward a deeper recession as the politically embattled coalition struggles to revive its sour relationship with the International Monetary Fund for the resumption of its loan programme to overcome its dollar liquidity crisis.”