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Current challenges faced by economy

Current challenges faced by economy

 

According to a report issued by the Institute for Policy Reforms, the economy of Pakistan faced serious challenges and vulnerabilities during the first quarter of the current fiscal year. The report also mentions remarkable increase in tax collections but foreign financing remains a major challenge for the economy. The gross domestic product of the country remained 4.4 percent during the period in review while the current account deficit recorded a growth of 120 percent as compared to the same period of the last fiscal year, exceeding the target set by the government. The International Monetary Fund, which is friend and foe of the national economy at the same time, has projected the economic growth at 5.6 percent. The government has accepted inflow of loans from all sides, but could not hold the foreign exchange reserves at the desired level. As the volume of imports increased twice the volume of exports, the current account deficit increased to the alarming levels. The government holds the import of machinery and equipment responsible for the rising deficit, but many experts reject this claim. The import of power generation equipment fell by 17 during the period in review.

The financial experts have been warning the government of the risks involved in accepting financial assistance from the international donor agencies. The recent move of the rupee devaluation has already put extra-burden on the national economy as the prices of food items and other commodities have begun to rise. The State Bank estimates the foreign exchange financing gap of $12 billion in FY 2018, but the gap will be higher than the expected and it could be a major economic risk next year. Finance Minister Ishaq Dar had been claiming of the macroeconomic stability, but various hostile factors affected the national economy. The country has been awaiting structural reforms since long, but the policymakers have other makeshift priorities. It is yet to be seen how long it will take to set new priorities. The report has pointed out risks and challenges and it is up to the government authorities to take them seriously or simply ignore everything.