Current economic situation.

Byline: Arooj Asghar

Two different opinions exists on the economic condition of Pakistan. Government claims that economy is back on track whereas independent analysts portray a different picture. There is no doubt that there is some improvement in some areas whereas a lot of improvement measures are not even under consideration. Government claims that they are now in a position to fulfill their election promises. Recently government has passed the first review of IMF, which is being presented as an endorsement from an international organization on the economic performance of the current government. Yet, independent economists have different opinion on the economic performance of the government. One of the points which every economist is highlighting is related to the growth of the economy. At a time when country needs development, businesses and job creation whereas focus of IMF program is on economic reforms and documentation of the economy instead of on the development and growth. Consequently in next few years the growth requirement would be multiplied and thereafter Pakistan's entire small to medium enterprise set up could collapse. Continuous hike in electricity and gas prices has put a lot of pressure on the businesses, their profit margins have squeezed, and top of that, fear of unknown and uncertainty prevails in the market. These factors have completely jammed the industry, be it small, medium or large, the issue is across the board. This will further aggravate in the three years of IMF program.

Government is apparently satisfied with the level of forex reserves now and we also see some stability in the forex rate these days. This is just because of hot money. Forex and interest rates will not change in next 12 months or even more till the time, foreign investors are not taking their money out of Pakistan. Keeping forex at a constant level incentives foreign investors to invest in Pakistan's debt market. Getting return of over12 percent in Pakistan means best returns in the world with no forex impact as such. Meaning thereby, Pakistan's debt market has become so attractive for the foreign investors but this can simply grind the local businesses due to high interest rates.

Pakistan has cleared the first review of IMF but no details are available except for a press release by IMF itself. May be in coming weeks, IMF will release a detailed assessment report, which can give a full picture of economic performance. Current account...