That the current account deficit (CAD) has hit $7 billion, or 5.3pc of GDP, in just five months of the outgoing fiscal – against the initial expectation of 2-3pc for the entire year, later extended to 4pc – shows that the projections of the finance ministry, commerce ministry as well as the state bank of Pakistan (SBP) have gone terribly of course in less than half the financial year. And this could not possibly have happened at a worse time for the government because the resumption of the IMF program is still nowhere in sight despite the staff level agreement some time ago. Once again the federal cabinet thought it wise to defer debate on the mini-budget as well as the SBP amendment bill, both of which must be passed by parliament if the bailout program is to be salvaged because it does not want any more bad press so soon after the electoral drubbing in the first phase of the KP local body polls. The main reason for the poor show in its stronghold was inflation, of course, and you don’t want to add insult to injury by debating highly inflationary measures the very next day; which is understandable, but only to a very small extent. Because it would still have to put the spotlight on these issues, if not tomorrow then a few days from now, regardless of their inflationary implications.
For the CAD to flash such a hard SOS signal at this point certainly aggravates the government’s problems. Amid uncertain times when official mouthpieces continue blabbering about record-high remittances and rising exports, when would Islamabad turn its attention to the mammoth deficit problem. But the main question pertains to why the state bank could not see this bullet coming from a long way away. Surely it has the capacity to do so, but whether or not it has the ability for it is now open to question. For some reason, it still believes that the deficit will be tamed in the remainder of the fiscal year, even though there is nothing at all to suggest such a course. That such trends are emerging when SBP’s autonomy is among the hottest topics in the capital is also quite unfortunate. It turning the other way as far as the unrelenting dollar flight and inflation pressures are concerned is just as distressing. Clearly, there is a very urgent need for the government to get its economic and financial team in shape if it does not want any more embarrassments in what remains of this electoral cycle.
