Hungering for growth

The problem is how to restart growth after stabilisation in a way that does not lead to a resurgence of the same deficits all over again.

- BY KHURRAM HUSAIN

FOR many months now Pakistan's economy is stuck in what we can call a state of 'peak stability', where the raw application of stabilising measures hikes in interest rates and taxes have successfully plugged key deficits that were fuelling inflation and causing foreign exchange reserves to plummet.

These measures stabilised the economy by choking all growth, the same tried and tested formula Pakistan has been using since 1988.

But the problem has always been the same: how to restart growth after stabilisation in a way that does not lead to a resurgence of the same deficits all over again.

That has been the bane of Pakistan's economy for too many decades now, booms followed by busts.

In the past, they always managed to get some sort of a bonanza from abroad to finance their growth. These inflows included borrowed money via the Foreign Currency Deposit Scheme in the 1990s, or the post 9/11 bonanza enjoyed by Musharraf, or the generous inflows from China and the Kingdom of Saudi Arabia in the middle of the 2010s, or the post Covid inflows and debt restructuring coupled with the temporary halt of the IMF programme in the period 2020 to 2022.

The few times we had adjustment without ensuing growth saw the country come to unendurable stagnation. Two examples would be the aftermath of the 2000 Standby Arrangement implementation (though 9/11 came along and changed everything) and the post Great Financial Crisis period following 2008.