Atif Mian, a well-respected economist, has criticized Pakistan’s economic policy terming it ‘non-sensical’. While comparing the experience of Ghana and Sri Lanka, he has concluded that Pakistan should “take decisive actions, aggressively restructure and take courageous actions”.
This is a veiled suggestion to declare default. This is a misplaced criticism made from a purely theoretical point of view. The gentleman has no idea how practical economics operates in practice. His comparison with Ghana and Sri Lanka, is also misplaced given the incomparably small size of their economies and populations relative to Pakistan.
Fundamentally, he didn’t care to analyze the structure of Pakistan’s debt which has less than 10% share in commercial bonds/sukuks, with the next maturity falling due in April 2024. The rest of the debt is owed to the multilateral and bilateral creditors. Both these classes of creditors are engaged with Pakistan and none has assessed that Pakistan should default.
The author has completely ignored the deep-rooted reforms Pakistan has undertaken in the last 9 months. These included market exchange rate, interest rate adjustments, mid-year taxation to improve fiscal position, imposition of levy on petroleum products and non-monetization of fiscal deficit. All these actions were undertaken under an IMF program which was unprecedented as never in country’s history such front-loaded conditionality was imposed.
However, we accomplished it through heroic efforts. It is unfortunate that despite such actions, the staff level agreement (SLA) has still not been reached delaying the release of 9th review tranche. The country is surviving economically and would continue to survive. What Pakistan has done is decisive and courageous; we would continue to walk the road to reforms to stabilize our economy and, in course of time, to steer it toward the path of sustainable growth.
The comparison of nominal exchange rate is also unwarranted. Pakistan’s real exchange rate is currently estimated to be 15% undervalued. The nominal rate is the result of speculation, market manipulation and general distraught from political instability. The undervalued exchange rate is reflective of the fact that underlying fundamentals are improving.
Pakistan has historically sold petroleum products at significantly lower prices than regional countries. With petroleum levy of Rs.50 achieved, this doesn’t involve any subsidy from the government. It would be unwise to levy additional tax on consumers on top of prices that have doubled in less than a year, especially when they are facing rising inflation. The author has cited this as an example of non-sensical policies. This is simply a misplaced example.
Pakistan economy has suffered because of international shocks of COVID, Ukraine War and devastating floods of last summer. The challenges that resulted from an overly heated economy, bequeathed to us in April 2022, and the breach of IMF conditionality on the eve of departure of PTI government, have been overcome by the present government.
The current account deficit, the primary indicator of balance of payments imbalance has firmly been brought down from a high of $17.5 billion to around $3.2 billion. This achievement is a reflection of bringing the economy to within its latent strengths and not on borrowed resources.
The author is also oblivious to unprecedented political challenges faced by the country. We are not living in calm and serene times. The present situation has major repercussions for the economy. With political stability likely to emerge soon, there would be a major economic turnaround.
Retire Atif Mian after this insult leave country shift to UK here no place for economists and intellectuals
What is this government propaganda? How much did they pay you to spill this bs?
How much they dar pay you to write this? Or did he threaten you to publish this tripe?
Atif just like his beliefs is delusional
Dar really thinks Pakistan’s population is an asset?
We are not paying back any bilateral creditor, loan rollover is technically a default on original loan terms.
April was projected to have current account surplus of 1billion but it was only 18million due to big remittance drop.
But still 2 months of current account surplus and rupee is still depreciating, can anyone explain that?
Are you writing this rebuttal in favor of the finance ministry?
Clearly, the air is full of fear in Pakistan and news sites are acting under the influence of n.@. zi like propaganda machine. Future looks bleak.
most disgusting comment system awards goes to this site. almost every second goes into moderation and never gets approved.
We all know what an intellectual Ishaq Dar is. I’m sure even arguing with him would be an insult to Atif Mian’s intelligence.
I agree with the analysis, delay to conclude SLA with IMF seems more of some hidden agenda by IMF despite meeting T&C’s… Bringing down deficit is great achievement despite slowing down of economy but was essential under the circumstances.. If deficit is at zero or lower, will be best… Taxes should be rationalized, too much of indirect taxes.. Plus this concept of non filer should go.. Anyone out of tax net, should be fined and prosecuted…
A quick few question and observations:
“The country is surviving economically and would continue to survive.”
Yes the country is surviving. But is it thriving? is mere survival what our government should be aiming for?
“Both these classes of creditors are engaged with Pakistan and none has assessed that Pakistan should default.”
So the situation is dire enough that Pakistan’s default status is hanging on how it is described by the creditors?
“…balance of payments imbalance has firmly been brought down from a high of $17.5 billion to around $3.2 billion. ”
That is good. But isn’t that is an artificial or forced situation now that almost all large imports are closed in to the country? What would happen when the LCs are open again?
Every country went through those tough times. Every country goes through tough times. Its part of life. The only reason Pakistan suffered is because of its weak economic position which is the culmination of many past governments, it was never ready for such hard times.
The IMF Tranche that is a huge point of contention, how much is it worth? what I mean is, How will such a small amount magically fix all the county’s problems. How will it fix exports in all sectors of the economy?
I agree with you 100%.
“The country is surviving economically and would continue to survive.”
Yes the country is surviving. But is it thriving? is mere survival what our government should be aiming for?