Key economic indicators forecast a good time ahead when they are realized into foreign exchange reserves and revenue collections. According to the State Bank of Pakistan, the current account deficit came down to $1.2 billion in July compared to $2.2bn in June. The sharp decline in CAD is due to a sharp drop in energy import cuts. But the foreign exchange reserves have yet to show a sign of improvement as all eyes are on the bailout package of the International Monetary Fund (IMF). Moreover, a drop in the country’s trade deficit of 18.3 per cent to $2.64bn in July from $3.23bn in 2021 is also a good sign, but the government’s ability to keep the moment in terms of the narrowing CAD is shaky. Economists call it a momentary respite for the cash-strapped government, saying the drop in the CAD may lower the economic growth as lower imports of raw materials means lower industrial production. In other words, the layoff will become the order of the day in the coming days. Last year, foreign reserves at this time stood at $19.5 billion, an all-time high in the history of Pakistan, whose previous highest figure was $18bn in October 2016. The decline in the CAD is short-term news, and all short-term indicators tell a happy tale for the economy, but the long-term effects are uncertain. As the country is trying hard to retain the old usual normal while trying to cope with the new normal being dictated by the higher fuel times, the new financial year opened with a revenue collection of Rs 413 billion, which the Federal Board of Revenue declared an increase of over 36 percent – Rs71 billion – from last year’s data. The revenue mainly came from sales tax and customs duty. There is bad news too that the more custom duty collections mean that the country is returning to the import-driven economy, which will again swell the current account deficit. The State Bank of Pakistan, however, shrugged off the rise in the deficit account, calling it the side-effect of the higher growth.
Give credit where it is due and the government must be applauded for decreasing luxury imports in the fiscal year 2021-22. The real devil, however, is in the detail of terms set with the International Monetary Fund, which seeks the collection of Rs70 trillion in the ongoing financial year. Given the stark realities of the pandemic in 2020-21, the rising trend of economic activities, and uncertain fuel prices due to the Russia-Ukraine conflict, one can predict that the government may achieve the figure of Rs70 trillion at the end of the day. Achieving the targets is a real struggle but the country’s downtrodden segments have gone through hell times in recent months. Please, provide them relief.
