Getting Better, but a Lot More to Do


The last few days have been the only ones to bring some sort of good news for the current finance minister. The IMF has more or less agreed to release the next tranche of the Extended Fund Facility. Equity and money markets are roaring once again. Even commodity prices seem to be plateauing in the international market. All this has been made possible by several factors, especially the ability of the government to squeeze imports enough (47 per cent month-on-month reduction in June) to finally give the trade balance some breathing space; even though import-dependant exports also suffered a little.
Going forward, Finance Minister Miftah Ismail believes that it is of vital importance to keep up this trend for at least another quarter. It is going to be painful, and he’s openly admitted as much, but if the government can push up exports in this period, it may well be able to wriggle enough to avoid the axe that has been hovering over the economy for the whole year. But that’s where the government will be confronted with difficult policy decisions. In the very short term, like three months, the only way to get a little more out of the export sector is through skilful diplomacy. But in the longer term, especially for an economy like Pakistan’s, a complete overhaul of manufacturing and production is going to be required: one, which will not just enhance the export basket but also add value to it.
And it won’t end with exports, unfortunately. The government will have to create the kind of environment, both economic and political, that attracts foreign investment. Otherwise, the good news of the last few days might eventually subside. The people should brace for more bad times since it is inevitable in such a monumental restructuring of taxes and subsidies, but it will only be worth it if their government works on necessary reforms in the meantime so the end result is good for everybody.