As foreign exchange reserves are declining due to rising gap between imports and exports, the total debt liabilities of the country have reached 78.7 percent and gross public debt at 68.1 percent of the gross domestic product. In contrast, the number of taxpayers has decreased significantly as 40 percent companies failed to file their tax returns this year, as a result, the revenue collection is insufficient to meet the current expenditure. Economists suggest the trade deficit has widened to $12.1 billion in the first four months of the current fiscal year as the imports have grown almost three times of the export volume. They believe the current account deficit will further increase and pressure on the foreign currency reserves, which are already on the downward trajectory, will further increase. The widening macroeconomic imbalances are also a threat to the financial security of the country, raising fears that the government could seek another bailout package from the International Monetary Fund. The situation has further deteriorating due to political reasons, as the prime minister has been disqualified and the new head of the state, Shahid Khaqan Abbasi, needs time to understand the situation. However, he also has limited time as the general elections are less than a year away.
A World Bank report indicates the country is vulnerable to external and domestic shocks as the foreign currency reserves are declining and the debt ratio has increased. Soon the country will face debt servicing as a big challenge. The emerging situation also questions the fiscal stability of the country in the coming months. Pakistan has gained over five percent growth in its gross domestic product last year, and that was made possible due to good performance of the agriculture and industrial sectors. The World Bank report suggests the country’s job market needs to grow by 2.1 percent per year for the next 10 years.
The situation on the ground is that being an agrarian economy, Pakistan needs to introduce corporate forming to increase investment in the sector. A majority of people associated with agriculture sector uses old methods of implementation and face shortage of water. But once the agriculture sector is treated as an industry, various issues will be resolved. Currently, Pakistan is heading toward debt trap as the finance minister, who had pushed the country toward loan economy, has already left the country on medical grounds and the finance ministry has been working without him for the last couple of weeks. One only hopes the situation will improve in coming days as currently no one is there to accept the responsibility of the economic mess.