“Tax rates are increasing, dollar price is rising and the businesses are shutting down. The government has announced a failed economic policy and the debt has increased owing to the rise in dollar’s value”
The incumbent PTI-led government has recently faced an obvious rise in criticism for their economic policies from the opposition, mainstream media and social media. But how far the criticism holds valid, when seen next to the statistics and figures from State Bank of Pakistan, showing a verified picture of our economic standing? How have the new policies impacted the indicators, particularly the macroeconomic indicators in Pakistan?
Here, have a look:
The graphs show that all the macro-economic indicators in the case of the incumbent PTI government are positive. For example, foreign remittances have considerably increased. Similarly, it can be seen that the foreign exchange reserves have increased as well, while our foreign borrowing has significantly decreased. Hence, it is evident in the case of macro-economic indicators particularly, opposite to what mainstream media propagates, have been performing reasonably well.
Comparing it to the previous government’s tenure, the statistics show that our foreign remittances have remarkably increased. The increase in foreign remittances is particularly influenced by the increased trust of our foreign diaspora in the Pakistani economy and government. It influences the sphere positively and is a determining factor in boosting the national economy as well. Pakistan currently stands among the top 4 countries that receive the most foreign remittances.
Currently, the biggest challenge that the incumbent government is facing is the repayment of loans. In the current year, we have to repay $9 billion and by the year 2023, we have to pay back $37 billion. The total amount is the principal amount + the accrued interest on the foreign borrowings.
While debt servicing has no connection with the current government that just took office, they have to repay the loan instalment to the development agencies primarily. If we don’t repay, the country will default and no one will extend credit to us again. It is quite a concerning situation that Pakistan is facing right now.
The image of foreign exchange reserves depicts a very pleasant and encouraging situation. Primarily, the reason is that our friend countries (the United Arab Emirates, Kingdom of Saudi Arabia & China etc.) have aided us with the balance of payments, hence our standing, as far as foreign exchange results are concerned, has improved. Although we have to repay this amount, it can be written off as well. With that, foreign remittances have also positively impacted the chart.
Coming to the exchange rate regime, the exchange rate should be independently determined by the Central Bank (State Bank of Pakistan), and it did determine. The independently determined rate increased to 141.62 rps, compared to the previously artificially maintained of 117.25 rps. As a result, our foreign exchange reserves increased and somehow, it positively influenced our balance of payments, which previously stood a very bleak position.
Our exports stood at $18 billion while our imports were at $55 billion. The current account deficit was also at a very vulnerable position, as our receipts were significantly less than our liabilities. However, the negative impact was that our foreign debt increased many folds and so did our import bill. It resulted in a price hike of many necessities that we import, including medicines, industrial equipment and pharmaceutical materials etc.
Another positive indicator is that the external debt pace has slowed down. It happened because of the incumbent government successfully controlled our current account deficit by reducing the non-development expenditures (protocols, extra cost etc), curbing down corruption and treating the financial leakages. Hence it shows an extremely encouraging picture for now as well.
What are your thoughts on this? Share with us in the comments bar below.