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Road to Recovery

Pakistan must form and pursue a comprehensive, long-term trade policy to compensate and control nearly 60 per cent of its total revenue being paid as interest on foreign debt.

By Sikander Taimoor | February 2022

Economics is a simple subject in theory. However, when it comes to its practical implementation, the subject of economics raises a whole host of questions with regards to a well-embedded social structure, regional and geopolitical interests, the significance of decisive leadership and most importantly, the prevailing economic situations in the context of the nation’s economic history. The confluence of such interrelated factors moving towards a progressive direction tends to be a formidable challenge, which is beyond the grasp of any government.

To grapple with such situations, a country must maintain a minimum two years of reserves to meet its expenditures along with a capital investment rate above 4 per cent growth rate. This is what Pakistan needs to achieve to embark on a path that will steer the country out of the prevailing economic crisis. Much to our chagrin, however, we have missed the boat by losing a critical phase of the economic cycle, which was required to plan the execution of growth initiatives.

To lead the country’s economy towards sustainable progress and long-term growth, planning the execution of capital flows by identifying economic phases and regulating business cycles is the first thing to do. Between 2018 and 2020, a period when capital investment was planned by leading nations, China’s capital investment stood around 6176 billion USD, India’s capital investment recorded over 16,00 billion USD and Bangladesh secured capital investments worth about 2,00 billion to fuel its growth for the next 2 to 5 years, according to the World Bank. As things currently stand, the total capital investment of Pakistan stands at 90 billion USD, which will only be consumed in debt servicing and nothing else.

Though some countries are looking forward to foster long-term economic collaborations with Pakistan, such partnerships have not been materialised into capital expenditures (CapEx).The State Bank of Pakistan is resorting to increasing rate and is pursuing a contractionary policy to control inflation, putting a question market on current business sentiment and economic outlook of the country. Pakistan’s total debt and liabilities have crossed Rs. 50.5 trillion while its growth rate is projected at less than 2 per cent by the World Bank. The planned execution of the much-touted China-Pakistan Economic Corridor (CPEC) has been in limbo since the country has signed agreements with international lenders. Economic policy-making must now be taken as a national security issue since we miserably lag behind in the realm of modern economic warfare.


In 2022, geo-economics is adamant to play its inevitable part in further deterioration of Pakistan’s economy, as the Federal Reserve institution is all set to implement a contractionary monetary policy by the second quarter of the year. The move by the central bank could trigger a devastating chain of effects for Pakistan in general and for its economy in particular.

As the dollar appreciates, it would further accumulate the debt, thus leading to a crippling manufacturing sector, with soaring prices of oil and raw material, not to exclude exorbitant interest rates. The trend will negatively affect our existing exports and will jeopardise our competitiveness in international markets. When the Covid-19 pandemic was at its peak, we failed to decrease our import bills, and currently the total trade deficit crossed 162 per cent in November, leading to the highest trade deficit recorded in a single month in terms of value.

To overcome prevailing economic constraints and fiscal challenges, we need to adopt a long-term approach as desired results cannot be achieved overnight or within the tenure of a single government regime.

Looking on the bright side, the Pakistan government has taken some positive steps to overhaul the economic engine and the country has received over 350 million USD in its ecommerce sector. In addition to that, the road infrastructure has been built and improved and investment procedures have been simplified. However, the question remains the same: will such piecemeal efforts be sufficient to heal the ailing economy? Your guess is as good as mine.

Briefly put, the road to recovery is paved by a slew of corrective but long-lasting measures as such greater challenges as currency devaluation, non-performing public sector enterprises and a negative global perception of Pakistan cannot be overcome through rhetoric and makeshift arrangements. Together with import substitution, we need to form and pursue a comprehensive advantage-based trade policy to expedite the industrialisation process in order to compensate and control nearly 60 per cent of the national revenue being paid as interest on foreign debt.

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The writer is a fundamental and technical analyst on gold and dollar, with an academic background in international business. He can be reached at sikander.taimoor@gmail.com

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