FB   
 
Powered bysps
        Society for Policy Studies
 
 

 
Fears for the economy
Posted:Aug 2, 2017
 
Print
Share
  
increase Font size decrease Font size
 
The amber lights were already flashing and now, with a change of prime ministers, the political uncertainty hanging over the economy has been exacerbated. The assessments of credit ratings agencies are not definitive, but a downward change tends to reflect investor skittishness based on similar assessments by IFIs and a country’s own financial institutions. Following the ouster of Nawaz Sharif, Moody’s Investors Service has warned: “If heightened political uncertainty and strife among the various branches of government disrupt the administration’s economic and fiscal agenda, macroeconomic stability and the government’s access to external finance could be impaired, weighing on Pakistan’s credit profile.” In July, Moody’s had affirmed Pakistan’s B3 rating and maintained a stable outlook — with important caveats. “Any material widening of the fiscal deficit, renewed weakening of the external payments position, loss of multilateral/bilateral financial support, or significant escalation in political tensions would also weigh on Pakistan’s credit profile,” it warned.
 
The problem for Pakistan is that the government continues to cling to a story of economic success and macro stability, while the consensus among economy watchers outside government is that Pakistan is on the verge of a familiar unravelling if urgent corrections are not made. The list of challenges is by now well known: pressure on the fiscal and external accounts; a build-up of circular debt in the power sector; an over-valued rupee; and CPEC projects creating potentially unsustainable debt liabilities. Mr Sharif, with his keen interest in road-building and electricity projects, had virtually turned over the handling of the economy to his finance minister, Ishaq Dar. Mr Dar used his carte blanche to gut financial institutions and regulators in a misguided quest to force unquestioned obedience to his economic prescriptions. The approach has only succeeded in leaving the country with weakened financial institutions at a time when the finance ministry needs some frank advice and genuine assistance in managing the tricky period ahead.
 
There is, however, at least a glimmer of hope. The new prime minister, Shahid Khaqan Abbasi, is an economic heavyweight in the context of the previous cabinet. Mr Abbasi’s potential successor, Shahbaz Sharif, is familiar with the CPEC projects and the electricity sector. If Mr Dar is given the finance portfolio again, his prescriptions should be challenged on merit and the prime minister should exert his influence to persuade Mr Dar to adjust course. Mr Abbasi has already warned that the revenue base is too narrow — a basic factor in the sustained and large fiscal deficit. Perhaps Mr Abbasi or the younger Sharif should also have the courage to address an overvalued rupee and policies that have allowed the external account to come under extreme pressure. Whatever path they choose — and the options are not many — it should be clear that business as usual is not an option. The government must not leave course correction to the caretaker or successor government.
 
Dawn News, August 3, 2017
 
 
 
 
Print
Share
  
increase Font size decrease Font size
 

Disclaimer: South Asia Monitor does not accept responsibility for the views or ideology expressed in any article, signed or unsigned, which appears on its site. What it does accept is responsibility for giving it a chance to appear and enter the public discourse.
Comments (Total Comments 0) Post Comments Post Comment
Review
 
 
 
 
spotlight image Indonesia’s President Joko Widodo has confirmed his presence for the occasion. In an exclusive interview with INDIA REVIEW & ANALYSIS, Indonesia’s Ambassador to India, Sidharto R.Suryodipuro, reminded Nilova Roy Chaudhury that the first Chief Guest for India’s Republic Day celebrations, in 1950, w
 
read-more
The words of Ho Chi Minh  “Nothing is more precious than independence and liberty” rang true for the people of the erstwhile East Pakistan when, with increasing brutality, the West Pakistani oppression spread across the land, writes Anwar A Khan from Dhaka
 
read-more
In a significant boost to New Delhi's Act East Policy, India and Japan set up the Act East Forum on Tuesday as agreed during Japanese Prime Minister Shinzo Abe's visit to India this year for the annual bilateral meeting that would help to focus and catalyse development in India's Northeast.
 
read-more
  United States Secretary of State Rex Tillerson reiterated on Friday Washington's warning that “all options are on the table” to meet North Korea's nuclear threat while offering to keep the lines of communication with Pyongyang open.
 
read-more
The 15th trilateral meeting of the foreign ministers of Russia, India and China concluded in New Delhi on Monday with many nuanced takeaways embedded in the joint statement of 46 paragraphs. Reiterating that the forum “is not directed against any other country”, the statement underlined the importance of the establishment o
 
read-more
The first thing that one sees when a flight approaches New Delhi is thick smog that envelopes the city and its lack of greenery.  In almost all other major cities of India lack of greenery is the most obvious sight that one sees when approaching it by air.
 
read-more

Pakistan has agreed to allow the rupee to depreciate after holding talks with the International Mone­tary Fund (IMF) on the country's economy.

 
read-more

Two major global changes in the past year; the ‘Brexit’ referendum and the advent of Donald Trump, writes Sandeep Kaur Bhatia

 
read-more

It is also imperative for India to explore other regions for markets. Its trade deficit with Latin America has been narrowing. Also, its trade with Mexico, Colombia and Guatemala has increased, ...

 
read-more
Column-image

Over the last 25 years, India's explosive economic growth has vaulted it into the ranks of the world's emerging major powers. Long plagued by endemic poverty, until the 1990s the Indian economy was also hamstrung by a burdensome regulat...

 
Column-image

Title: A Ticket to Syria; Author: Shirish Thorat; Publisher: Bloomsbury India: Pages: 254; Price: Rs 399

 
Column-image

Gorichen, a majestic peak in the Eastern Himalayas at an altitude of 22,500 feet, is the highest in Arunachal Pradesh. Beautiful to look at and providing a fantastic view from the top, it is extremely tough climb for mountaineers.

 
Column-image

It is often conjectured if the reason for long-standing conflicts and insurgencies, in the developing world, especially South Asia, is not only other powers fishing in troubled waters but also the keenness of arms industries, mostly Western, to...

 
Column-image

Title: The People Next Door -The Curious History of India-Pakistan Relations; Author: T.C.A. Raghavan; Publisher: HarperCollins ; Pages: 361; Price: Rs 699