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Question of macroeconomic stability

Question of macroeconomic stability

According to newspaper reports, the International Monetary Fund has cautioned the government of the risks to the much publicized macroeconomic stability,which the government claimed to have achieved during the last four years.The lending agency fears the rising burden of debt, which has reached Rs21.2 trillion or 66.6 percent of the gross domestic product, could tarnish the positive outlook of the economy. Reports suggest it was the first review of the IMF after the expiry of a three-year $6.2 billion Extended Fund Facility programme ended in September last year. The macroeconomic vulnerabilities are appearing again, bulldozing most of the gains achieved in the programme. The country’s current account deficit reached nearly 3 percent of the GDP during the outgoing fiscal year 2016-17 or over $9 billion. The falling exports and increasing imports are leaving a deficit of billions of dollars in trade. Pakistan’s foreign exchange reserves have declined to $15 billion and Islamabad has so far been resisting devaluation of rupee. However, the donor agency wants the government to allow flexibility in the exchange rate.

Another blow to the economy is expected during the next fiscal year if the government enters another loan programme with the fund. The accommodative approach of the lending agencies can be held responsible for the rising volume of loans and the country could be turned into a client state of lenders. The government has recently signed a $300 million deal with Asian Development Bank to improve and reform the power sector, as the nation is still facing the shortage of electricity both by industrial and domestic consumers. The circular debt has crossed Rs 400 billion and the government is already struggling to maintain the macroeconomic gains. The nation is still awaiting the structural reforms in every sector to ensure inclusive growth.However, the fund officials have directed the government to implement sound policies,introduce reforms and achieve higher growth target to keep the favourable outlook of the economy intact. The tenure of the present government is almost in its final year and it will have to be proactive to continue the economic journey at the right track.

The time has come the government should curtail its expenditures and take austerity measures in the administrative level. The offices of the president and governors are symbolic in nature, but consume billions of rupees taxpayers’ money every year.