How to tackle economic and governance challenges in 2022?

At present, Pakistan is facing a variety of challenges that needs to be tackled appropriately. Two most critical challenges are ensuring economic stability in the country and making improvement in the governance mechanism in 2022. The economic challenges involve the stability in the value of rupee versus US dollar and other major currencies, containment of unwanted trade and current account deficit, provision of uninterrupted gas and power supply. In fact, economic growth and stability is inter-linked with the issues quoted above. Depreciation of rupee not only increase the cost of doing business, but it also puts extra financial burden on the consumers. For exporters and those receiving remittances, devaluation fetches more rupees, but importers, local businessmen and consumers face serious repercussions of the vicious cycle of rupee devaluation. These days the dollar-rupee exchange rate is revolving around 178 rupees in the inter-bank and 180 rupees in the open market. Nevertheless, neither the government nor the economic analysts are in a position to guess the dollar rupee parity in 2022, which, in other words would create more uncertainty in the country, promote dollarization, discourage foreign and local investment as well.

Similarly, the trade and current account deficits too weaken the economic foundations of the country. In fiscal year 2019-20 and 2020-21, the government was able to reduce the trade and current account imbalances. However, in 2021-22 the trend reversed and the country has lost too much on these two fronts. For example, the trade mounted surged to above 15 billion dollars in five months of the ongoing financial year while the current account deficit hit the record high level of over 5 billion dollars mark. The external trade imbalance has deteriorated to such an extent that the government had to obtain 3 billion dollars cash deposit from Saudi Arabia a few weeks ago with the aim to stabilize the dwindling foreign exchange reserves. In addition to this, the government is enforcing harsh conditionalities of the IMF to qualify for the resumption of suspended bailout package, setting aside its side-effects for economy, business, and impact on the consumers.

Improving the governance mechanism is also a key to ensure smooth sailing of the economy. In the last couple of years, the country has experienced many price-hike shocks and crisis of essential consumer items such as sugar, flour, gas and electricity, in the absence of a mechanism to check and balance the demand and supply system in the country. Whenever a crisis emerged in the country, the government acted only when the problem deteriorated to such an extent that the media and the consumers raised a hue and cry in the country. For evidence, the cases of sugar, flour, gas and electricity are enough to cite here. In winter season, we see crisis of gas and in summer, we experience power outages. This phenomenon is not new, but during the era of the PTI government, the crisis has deepened just because of non-existence of a check and balance system. For example, the adviser to prime minister on finance Shaukat Tarin has admitted that the flawed policy of the government has created gas crisis in the country. He said that timely decision to import gas could have averted this unwanted chaos.

The year 2022 is the last calendar year for the PTI-term because the caretaker set-up will be in place in April 2023 to hold next general elections (in case the govt completes its 5-year term), the government should focus on developing strategies which not only pave the way for economic stability but also ensure a good governance in the country. If the government could control trade and current account deficits within the desired levels in the last two fiscal years, why it could not demonstrate the same capability to tackle the challenges associated with prudent management and good governance in 2022 and beyond it to win accolades from the people.

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