ISLAMABAD: Experts in Pakistan on Saturday attributed the rapid economic decline of the country in the first ten months of the current fiscal year to growing political instability, as data showed a sharp reduction in exports and foreign remittances during this period.
Pakistan witnessed political unrest after the ouster of ex-premier Imran Khan in April last year which led to a power struggle between his Pakistan Tehreek-e-Insaf (PTI) party and the coalition administration led by Prime Minister Shehbaz Sharif.
Between July and April, the country’s exports decreased from $26.3 billion to $23.2 billion, showing a decline of 11.68 percent, according to the official data compiled by the Pakistan Bureau of Statistics. Pakistan’s imports declined from $65.5 billion to $46.9 billion during the same period which implied a 28.45 percent reduction as compared to the previous fiscal year.
According to the State Bank of Pakistan (SBP), workers’ remittances recorded an inflow of $2.2 billion in April this year, signifying a 12.9 percent decrease on month-on-month basis. Cumulatively, with an inflow of $22.7 billion, the remittances fell by 13 percent during first ten months of the ongoing fiscal year, as compared to the corresponding period during the previous one.
Economists spoke of various factors behind Pakistan’s poor economic performance, including political uncertainty and frequent policy reversals related to exchange rates and imports.
“The overseas Pakistanis have been waiting for stabilization of rupee-dollar exchange rate before investing in financial instruments in Pakistan,” Dr. Vaqar Ahmed, senior economist and joint executive director of the Sustainable Development Policy Institute in Islamabad, told Arab News.
He said the foreign remittances were expected to pick up pace before Eid al-Adha, a major Muslim festival that follows the Hajj, next month, though it would otherwise remain slow amid an unstable exchange rate.
“Exporters have been waiting for the June 9 budget to see if any structural shift in policy is introduced for them,” he said. “The exporters are currently not taking orders, fearing they will not be able to deliver if the government jacked up electricity and gas prices again.”
Ahmed said exporters were also finding it difficult to procure raw material and machinery from abroad, leading to a slowdown in production and export processes.
“Statistics clearly show that our economy has plummeted due to multiple factors in the last ten months including political and policy uncertainty,” he continued.
The country’s official forex reserves have fallen to $4.3 billion amid uncertainty over the revival of $6.5 billion International Monetary Fund (IMF) loan program. The central bank has revised the GDP growth estimate downward and projected it to stay below two percent growth in this fiscal year due to the weak performance of large-scale manufacturing and agricultural sectors.
Afia Malik, a senior research economist at the Pakistan Institute of Development Economics (PIDE) in Islamabad, said the country’s economy would start growing if the government reduced its expenditure and footprint while allowing private sector to invest in different businesses by softening its regulations.
“Half of the textile units in Punjab province are closed due to a ban on the import of raw material,” she told Arab News. “This will ultimately result in a decline in exports and job opportunities.”
Malik said the government had also failed to revive the IMF loan program, leading to greater economic uncertainty and unstable foreign exchange rates.
“This is leading to a decrease in our foreign remittances,” she said while suggesting the government to introduce major structural economic reforms with a focus on productivity and exports to revive the economy.
