A report was released by the Institute for Policy Reforms (IPR) on Monday to review the economic indicators for the six month period. The report stated that the rise in the current account deficit is alarming since it has already reached 2.6pc of the Gross Domestic Product (GDP), higher than the annual target of 1.5pc of the GDP. This translates into Pakistan’s exports being at a historic low as  a ratio of the GDP.
This ratio stood in double digits in 2000-10 but now stands at 5pc. The report goes on to say that Pakistan has had higher current account deficits but they were funded by grant aid or foreign direct investment (FDI). In other instances, Pakistan sought help of the International Monetary Fund (IMF).Now that the IMF programme has concluded, it is unclear what choices the country currently has.
The domestic economy continues to remain volatile. The State Bank of Pakistan’s (SBP) decision to impose 100 pc cash margin on consumer goods import could further restrain the economy especially considering low energy prices during the current times, the report added.
Moreover, the external sector is likely to suffer since it is dependent on exports and workers’ remittance, which have been following a downward trend. According to the report, low competitiveness and lack of manufacturing depth are the prime reasons that have led to declining exports.
Furthermore, the report highlighted that the government is not focusing on job growth for some 2 million youth that are entering the job market on an annual basis. The investment hovers at around 15pc of the GDP, stated the report.
The report suggested taking up the investment to GDP ratio to 20pc which translates to approximately $16b annually.This should be financed by national savings and higher FDI, directed the report.
On a positive note, the report acknowledged recovery signs in the economy including low discount rates that led to growth in private credit.
The report recognized that China Pakistan Economic Corridor (CPEC) investments and rising development spending will boost investor confidence. However, rising current account and fiscal deficits will prevent desired results from being achieved.
The report also revealed enhanced public projects spending with the release of 60% of funds for the year. However, progress has remained uneven across sectors. Release of funds has been higher in LNG power generation, highways, railways, and PAEC compared to key sectors such as water sector, health and higher education.
