“Winter has come – and if the maesters are right, it would be the coldest in a thousand years.” It goes for Pakistan’s economy accurately, though not literally. A recession has come to Pakistan, which is but natural; however it came a little late in Pakistan than the rest of the world.
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Macroeconomic indicators such as GDP, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.
Recession is here and the current government is not to be blamed or the previous one for that matter. It is a natural cycle, and economies have to go through a recession or the negative economic growth eventually. Nevertheless, it is going to hurt more and might remain for a longer period for the economic managers of the country do not seem prepared for such a situation.
Economists, analysts, businesspersons and journalists have started expressing disappointment with the economic team of the government, as the measures taken as well as those not taken shattered the confidence of business community.
A squeeze on industry and by extension working class is made worse by the effects of rising interest rates and a fall in the Pakistani rupee in the past year of nearly 34%. The economy, which a year ago was growing at 5.8% annually, has slowed sharply. The cost of food, electricity and clean water has shot up.
Ministry of Commerce notified several regulations and imposed regulatory duties on imports to protect local industry and discourage excessive imports, which was a good thing to do. Grip was tightened on mis-declaration and under-invoicing to secure government revenue. However, it backfired as legitimate i.e. revenue generating imports reduced significantly and smuggling surged to record levels.
These regulations and tariff revision are quite important and should be in place, but absence of proper planning, implementation framework and competent managers only caused more damage.
There seems to be an absolute absence of coordination among the ministers and advisors. The claims and counter claims made by government’s ministers and advisors have only created an uncertainty among the business community.
Government recently re-constituted boards of public sector enterprises, which again was a good thing to do; and yet there’s been sharp criticism by the apex trade bodies as they were not given representation on the boards, even they were not consulted. Such an attitude is good enough to frustrate the revenue engines.
The less than one year of the incumbent government has exposed a lot and apparently they do not seem to be prepared to handle the recession, or even understand the dynamics of the country’s economic system.
Usually, negative growth persists for around two years before it bounces back. Here it might take longer. There is another thing that should be mentioned is that governments in Pakistan are less than independent in making policy decisions, which makes it even difficult pursue their own agenda to the letter.