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Solution to current account deficit

Solution to current account deficit

According to the government policymakers, the country is facing current account deficit, but there is no plan in the pipeline to enter another loan programme with the International Monetary Fund. The country imported goods worth $53 billion during the previous fiscal year and the volume is expected to increase to $60 billion this year. If the exports remain merely $20 billion, the country will face a huge trade deficit of $40 billion next year. The government will only two options left to fill the financial gap and that is to get further loans from international donor agencies or float another module of international bonds. The country imported goods worth $29 billion during the first half of the current fiscal year, incurring trade deficit of around $18 billion. Earlier, the government had imposed regulatory duty on hundreds of goods, including raw material used in the manufacturing of exportable goods, increasing cost of production. This made Pakistani products uncompetitive in the international markets. If the government introduces another module of international bonds, it will likely to be backfired and further devaluate the national currency. It appears the fund managers are playing with the country’s finances as a hobby and not as a responsibility.

The regulatory duty increased the cost of production of the exportable goods, but left little effect on the import volume. Duty on legally imported goods also unleashed the gates of smuggling and corruption in the country. So far, the remittances sent by expatriate Pakistanis are a cause of relief for the economy, but expatriates are also forced one way or the other to stash their money in the countries they live. The successive governments in Pakistan believed in achieving short-term goals, but caused long term losses. Every policy and every step brings more harm to the economy than any good. Though the remittances are steadily growing but those are not alternate to export earnings. The only way to overcome financial woes is to attract local and foreign investment. Solution to trade deficit lies in the industrial sector which needs encouragement and tax relief. There is also need to curtail regulatory duty on the raw material which is used by the export-oriented industries. The devaluation of rupee has added additional burden on the economy as it will increase inflation, cost of production and lower the overall profile of the economy.