By Aadil Mustafa Jillani
Investment is recognized as the critical tool for economic growth in developing
nations which creates opportunities for their better tomorrow. We as nation are very unfortunate that the hopes of masses for
better
tomorrow dilutes by every passing day as not a single socio economic reform is being introduced
neither by Federal nor by Provincial Govts during last four years. Economy of Pakistan has never been in
a difficult situation as it is today. Trade deficit up by 37% to $19 bln, C/A deficit shoot up to $3.7 bln, fiscal
deficit increased to Rs.1.2 trillion expected to touch historic levels of Rs.1.5 trillion in FY12 which will be above 7.5%
of GDP and last but not the least
public debt crosses Rs.13 trn. Pakistan’s external
sector position has exposed to certain risks for
investors, as a result deteriorates macro-economic
dynamics of the country.
Foreign and domestic investment in Pakistan due to power crisis & deteriorated law and order situation and the default
of sovereign guarantees by
Govt regarding IPPs payments shaken investors' confidence drastically. As a result net foreign investment in Pakistan during 11MFY12 declined by massive 63% to
$679 mln
which
were more than $8 bln
in a single year witnessed in FY07. Govt should
be
concerned regarding quality of investment in Pakistan not just “any kind of investment”. We are in dire need of
quality investment in productive sectors like power, infrastructure, and
mining & fertilizer sector that
adds value in national income & create employment opportunities for rapidly growing human resource in Pakistan. The consistent economic policies, urgent economic reforms & improved governance can
bring
a real
difference in making productive investments.
Moody's
expressed its concerns over economy of Pakistan highlighted political
instability, rising trade deficit & repayments to the IMF. Since PKR depreciated by more than 10% in FY12, C/A deficit stands at
$3.7 bln and SBP reserves depleted by $1 bln in just 3 weeks pushed overall foreign exchange reserves
to
$15.04 bln. Furthermore Pakistan has to pay $ 3.09 bln to IMF including loans and interest in FY13. Most importantly not only the earning capacity (export revenue) in fact repaying capacity of Pakistan has also been
reduced
significantly which
adds fuel to the fire & increasing uncertainty for the economy.
Repayments to IMF (in
$ mln)
Period Principal Interest Total
FY12
|
1,203.0
|
188.5
|
1,391.5
|
FY13
|
2,955.6
|
138.8
|
3,094.3
|
FY14
|
3,383.7
|
55.9
|
3,439.5
|
FY15
|
1,338.9
|
15.8
|
1,354.7
|
FY16
|
59.4
|
1.0
|
60.4
|
Total
|
8,940.6
|
400.0
|
9,340.4
|
source:SBP
|
So in
my
view, Pakistan likely to downgrade by Moody’s due to deterioration in macro-economic
indicators of the country. It
will
further depreciate currency, increase uncertainty & appreciate domestic
in Pakistan. Economy always suffers during the election
year
as political influence disturbs structural macro-economic framework in
any
country & Pakistan is no exception.
Pakistan is not just facing
risks internally due to political & economic instability in
fact global economic slowdown along with Euorozone crisis
also diluting external gains like export earnings due to poor demand & rising concerns over sustainability of
remittances. The EU is the biggest economic hub in the
global economy and is the largest export market for countries in
the developing
world. One can analyze the sensitivity
of
the EURO crises from the fact that, top 3 European economies including Germany,
France & UK growing
below 1% GDP
while avg
un-employment rate stands at 7%.Out of 16 Euro nations, five countries have negative GDP growth. According to the study by Overseas Development Institute,
Euorozone crisis
will cost world's poorest countries $238bn.
The global recessionary wave is very serious
to all the economies as per IMF, WB &
other international organizations and
it will linger on
in upcoming years. Fiscal re-union, massive economic reforms & consistent strategic action
are the only answer to global economic slowdown.
As far as Pakistan
is concerned, whole
nation has
to face the
cost
of
election year
which will
jeopardize the concrete
strategic framework for economy & will
further deteriorate basic principles of economy.
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