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Imminent challenges to economy

Imminent challenges to economy

There are several factors including, growing external account challenges, trade deficit and energy crisis, which have the potentials to slowdown the economy of Pakistan in fiscal year 2018-19. In a bid to tighten monetary policy, the government allowed depreciation of rupee to deal with growing external account challenges, but the move faltered half way. The rupee value is experiencing a free fall and the claim that no further depreciation will be allowed could backfire as an interim government is going to be installed in Islamabad. When official machinery will be busy in holding general elections, there will no one to strictly monitor the dollar value in the open market. Another challenge facing the economy is acquisition of loans and grants from international financial institutions to contain the drawdown in foreign exchange reserves. It depends on the economic team of the next government to resolve the issue of trade deficits and official foreign exchange reserves. The next government will have to face the slow economic growth, adversely affecting its performance. The present government denies any pressure on the external account, as it is totally banking on the implementation of the energy and infrastructure projects under the China-Pakistan Economic Corridor.

Economists fear the balance of payments constraints would also cut short the growth to 5.1 percent in fiscal year 2018-19 and there is little hope that there will be any improvement in the supply-side factors. The next government will also have its first year in the office and it will take time to understand intricacies of economic management. The present government is proud of achieving the growth rate of 5.8 percent in the gross domestic product and that also in the outgoing fiscal year. Unfortunately, the political parties give little importance to understand the matters surrounding financial, trade and investment. When any of the political party comes to power, it does not know from where to start as the whole system is a mess in this country. The world economists put Pakistan in the list of next emerging markets, but government policies always cause damage to the national economy. Unless the government concentrate on the production of value added goods, it is difficult to enhance exports and lower trade deficit. Irrational taxes and duties on imports will not only encourage smuggling, but also corruption and the country will continue to fall in quagmire of debts and grants.