The government recently claimed that the country was heading towards economic stability even as challenges like inflation, high energy costs and structural inefficiencies persisted.

Some government leaders cited certain improvements, such as a reduced current account deficit, gradual decrease in interest rates, increased foreign exchange reserves and growth resumption due to adherence to the IMF programme. This might be the beginning of a process but we have witnessed such short-term improvements in the past that fizzled out as the transparency and the determination for reform shown at the start were not sustained.

Economic stability refers to a state where an economy experiences steady growth, low inflation, sustained fiscal and trade balances and predictable financial markets. It creates an environment conducive to investment, employment and improved living standards. Stability is characterised by minimal fluctuations in economic indicators, such as GDP, inflation and currency value.

Economic stability is achieved through prudent policies. It is linked to governments’ ability to withstand political pressures. Economy needs fiscal discipline i.e. managing government spending and debt sustainably to avoid excessive deficits. Has this objective been achieved?

We are still far from justifiably bragging about fiscal discipline. The ruling elite enjoy mind-blowing perks not available even to the rulers in many developed economies. Efforts have been made at right sizing government departments but the benefits of the exercise have been nominal. Significant savings will only be achieved if large state residences and protocol for the VIPs are abolished.

The state should not provide bullet proof vehicles. Measures like a ban on entertainment at government functions make no big dent on fiscal balance. The government is on the right path due to the IMF pressure.

Still, many commonsense measures have not been taken.

Among tax evaders, traders top the list. They deposited less than Rs 2 million in taxes in the first quarter of this fiscal. The much smaller salaried class was meanwhile made to contribute Rs 70 billion during the same period. There is a long way to go therefore celebrations will be justified.

The central bank is prudently using tools like interest rates to control inflation and stabilisecurrency. It has ignored pressure from big business and government. This is the reason that our foreign currency reserves are increasing, the rupee is stable and inflation has declined appreciably.

Now the ball is in the government’s court. It must improve governance. This could lead to greater efficiency and competitiveness in key sectors of the economy. Currently the government seems unable to exercise its writ in crucial sectors, including tax collection and maintenance of law and order. These indicators point to bad governance.

A turnaround in the economy requires a reduction in the reliance on imports, a boost in exports and effective foreign exchange reserve management. We are still far from these milestones. Our foreign exchange reserves are still less than out three-month import bill. 

We need to undertake structural reforms recommended by the IMF as well as many local economists. The weak implementation of already-instituted reforms has been a major disappointment.

Currently, we are balancing our expenditures through heavy borrowing from domestic banks and foreign loans instead of bringing tax revenues to the required level. There is a dire need to reduce reliance on loans by increasing tax revenue and diversifying exports.

Our exports are still less than half our imports (currently suppressed through central bank interference). We depend heavily on a limited set of textile products. We are almost absent from blended or manmade fibre textiles which command 70 percent of the global textile market.

Our sunshine export sectors are IT and pharmaceuticals. The IT sector is gradually picking up but pharma exports have plateaued. The government must facilitate all export sectors even handedly and give them refunds on taxes these exporters pay locally.

There is a need to create favourable conditions for domestic and foreign investments. Investments come automatically if the conditions for investment are fair and equitable. The bureaucrats delaying approvals on gas, power, water supply connections are a serious obstacle. Land transfer and business approvals too should be prompt.

Foreign as well as domestic investors need smooth operations. They need law and order and corruption free general working that ensures that no operator escapes sales tax or any other tax. Genuine investors pay minimum wages to all workers. Businesses violating these laws should not go unpunished.

Investors need an even playing field. We need fair governance to attract investment in Pakistan. Economic stability will remain a dream until we can ensure free and fair opportunities.

A turnaround in the economy requires a reduction in the reliance on imports, a boost in exports and effective foreign exchange reserve management. We are still far from these milestones. Our foreign exchange reserves are still less than out three-month import bill. Moreover, these reserves include dollars deposits by friendly countries.

While certain indicators like the current account deficit and forex reserves have shown improvement problems like inflation, sluggish industrial growth and reliance on external loans suggest that the economy is not stable. Long-term sustainability requires structural reforms, robust industrial policies and better governance.

Achieving economic stability is a gradual process. It requires consistent efforts across multiple fronts. While recent measures may provide some relief, achieving genuine stability in Pakistan will require addressing deep-rooted challenges, such as energy inefficiencies, tax collection and dependence on external aid.

The writer is a senior economic reporter