The economy of Pakistan has never remained in comfort zone due to various political and administrative reasons since independence and has always confronted with the issues like inconsistent and ad hoc business strategies, energy crisis, irrational tax rates and collection system, incapable machinery to implement policies and last but not the least political uncertainty, which remained integral part of the history in this country.

In its biannual publication on the state of the economy, the World Bank projected the growth rate of Pakistan’s gross domestic product at 5.5 per cent for 2017-18 and 5.8 per cent for 2018-19, assuming that the government will be able to handle political and security risks in the coming years. The growth has been expected despite increase in macroeconomic imbalances the country experienced during the last financial year and expected increase in oil prices in the international market. However, it also counts various other positive indicators with potentials to push forward the GDP growth along with marginal recovery in remittances sent by Pakistani expatriates from abroad.

According to the report, the services sector is expected to grow by 5.8 per cent, industrial sector by 7 per cent and agriculture by 2.9 per cent. On the home front, the current account deficit is the serious area of concern which has jumped to 112 per cent year-on-year in the first quarter of the fiscal year 2017-18. An increase in the foreign direct investment is expected, but lower exports and rising imports will adversely affect the foreign exchange reserves.

Officially launching the report, a bank official stressed the need for continuation of economic reforms and policies to enable the country compete in the international market. The other international financial institutions have times and again asked the government to introduce structural reforms in every sector of the economy. But halfhearted policies are introduced which faltered the half way, sometime at the initial stage.

The introduction of policies and reforms both are important to set the economy on the path of growth and development. A trend to make ad hoc policies should be discouraged as the makeshift arrangements always enhanced economic woes of this country in the past. At a time when political polarisation is on the rise, the absence of finance minister from the country has added to the troubles of the national economy. A war of words within the government and opposition politicians and alleged confrontation in various organs of the government are also sending wrong signals to the world.

A government which knows that it has less than a year in the office has already been demoralised and it is unable to handle any situation whether it is economy, politics or the law and order. The daily used commodities are already vanishing from markets and increase in inflation is also expected in the coming months.

The political situation in Saudi Arabia and Gulf states is worsening owing to their domestic issues and diplomatic row with Qatar and Iran. The growing deterioration of their economy would adversely affect the flow of remittances into Pakistan. As the exports are not picking up to the satisfactory level and imports have increased twice, the pressure on the foreign exchange reserves will also increase which have come down to around $14 billion. Some experts predict the government could sign another loan programme with the International Monetary Fund.

In disregard to what the World Bank believed that the flow of remittances from the Gulf States will increase, there are strong chances that the political turmoil in the region will affect the flow of money into Pakistan. Saudi Arabia is passing through a process of power struggle within the royal family and is facing its own version of economic crisis. Thousands of Pakistanis are returning home and those opting to stay in the kingdom are bearing the brunt of unreasonable taxes, unemployment and hostile working conditions. Under the new employment rules, the kingdom has imposed 100 riyal per month tax on each member of an unemployed family and decline in the number of development projects will leave no room for foreigners to stay in the country where a host of local population is facing unemployment and deteriorating economic conditions.

Pakistan is expected to experience not only a major loss of revenues but a major issue of unemployment once the expatriates from Gulf States and Saudi Arabia return home. The flow of new manpower to Saudi Arabia and other countries also declined this year.

Despite the fact that the World Bank has projected a promising economic growth in the GDP for this and the next year, it also cautions that the growing fiscal and external imbalances have the potentials to curb the country’s growth prospects. The government had been claiming macroeconomic stability during the last three years, but the country’s debt piled up to a dangerous level. The growing fiscal deficit, low mobilisation of revenues and rising government expenditures in the absence of any austerity drive have also added their share to the economic conditions.

However, keeping in view the continuous acceptance of the foreign loans, it appears the policymakers give least care to imminent issue of debt servicing. Experts believe depending on foreign assistance and grants is not a good policy for the future of the country’s economy. The bank has rightly pointed out that reforms and macroeconomic stability are the key areas the government should focus on and it should have to put its own house in order before seeking foreign assistance. It is hoped sanity will prevail in the financial circles and dependence on expensive loans will be minimised.

The policymakers have so far failed to introduce tax culture as tax to GDP ratio in Pakistan is not only the lowest in the region but also in the world. However, instead of launching capacity building programmes for the officials concerned to fully implement the tax policies whatever they were, the successive governments always opted for indirect taxes the number of which has now disproportionally increased. The current government has limited time in the office, but unlimited responsibilities on its shoulders and it will have to carefully walk on the economic tightrope until the end of its mandate.