Hardly a day goes by without extremely troubling news about the economy on the front pages. For quite a while, it’s been the unrelenting fall of the rupee, which breaks records for its poor performance literally every day.
Now, the current account deficit has also made another appearance by expanding six-fold year-on-year, from $2.82b in the fiscal year 2020-21 to $17.4b in 2021-22, and reaching the second-highest level ever recorded. Its worst performance ever was in FY18, when it touched $19.2b, and just four years later, it’s flirting with the same figure.
The state bank will harp on about an out-of-control import bill, driven primarily by turbo-charged commodity prices in the international market, but this explanation will bring very little comfort to businesses and households that will ultimately pay for this shortfall.
Let’s not forget that just the other day, the IMF warned of a global recession just around the corner, which will hit emerging and frontier markets particularly hard.
Pakistan’s economy, in fact, is not far from feeling recessionary pressures because of suffocating fiscal and monetary policies mandated by the IMF.
If the global economy slows down as well, especially the US and European economies that are directly in the line of this recessionary fire, then our premier export markets will be compromised and the CA deficit will bloat even further.
This imminent recession, just two years after the last one, is coming in a highly inflationary environment that has got central banks all over the world in a race to raise rates; Pakistan being no exception.
And with the chips falling into their places one by one, the government ought to prepare for perhaps the toughest slowdown in the country’s recent history. The problem is that with all the “prior conditions” of the IMF program, the country has no room to manoeuvre whatsoever. Unless a miraculous way of this crisis presents itself very soon, it seems we must be ready for more, and more frequent, headlines about the economy nosediving with increasing speed.
