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Issue of macroeconomic risks

Asking the Pakistani government to address current risks, the World Bank has agreed to support economic reforms to achieve the development goals. Pakistan has been facing various economic issues for the last many years and needs to exploit human capital development, achieve macro-economic stability, enhance renewable energy and involve private sector in infrastructure projects. However, it is difficult to understand how the bank reneged from its earlier remarks on external financing of $31 billion in its recent South Asia Economic Focus report. The bank, on one hand, not only praised the government for stabilizing its economy over the past four years, but also appreciated it for achieving 10-year high growth of 5.3 percent during the financial year 2016-17. But on another, the bank expressed concern over the headwinds in the external sector and a rising fiscal deficit which could put hard earned macroeconomic stability at risk. This is the issue haunting the government which would need external financing of around $17 billion or up to 6 percent of gross domestic product during the financial year 2018 to deal with current account deficit and debt payments.The figure, $17 billion, is $1 billion less than what the Ministry of Finance had projected for the current fiscal year.

Earlier, the government had shown a fierce reaction after the World Bank had projected the external financing needs of the country at $31 billion for this fiscal year to cover the current account deficit and debt payments. The lending agency has rectified its mistake after holding meeting with a Pakistani delegation in New York but the economists believe the rectification by the bank will not change the ground realities.The bank, in the biannual report ‘South Asia Economic Focus’, had remarked that the country’s external sector was facing instability and foreign currency reserves were also insufficient to deal with import bill.

Pakistan is facing multiple problems one of which is undue pressure from the new administration of the United States. Terrorist activities are again picking up and the economic progress has been facing resistance due to political chaos. The politicians are busy in tug of war and it appears the national interests are not anybody’s concern. In the current situation, the World Bank’s support for economic reforms is a good omen but the burden of responsibility lies on the government alone. It is the government which has to take possible steps to achieve development goals.

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