On the brink of disaster

LAHORE: February exports were $2.80 billion, that’s good news, but we’re waiting for import statistics. Some of the bad news includes crude oil prices trading above $115 a barrel, the rupee steadily losing value and inflation rising.

Exports are booming, and we should be happy about that. However, what matters most is the trade deficit. Over the past eight months, exports have grown by 26%, but imports have jumped more than 54%, creating an unmanageable trade deficit.

The many measures taken by the government to limit unnecessary imports have not worked, with the trade deficit steadily increasing. We were expecting a significant slowdown in imports in January, which did not happen.

Instead, the trade deficit was highest in January this year. The fact that the trade adviser did not reveal the import figure for February gives the impression that imports remained above government estimates.

The trade deficit has a negative impact on our foreign exchange reserves which continue to be depleted. Even high remittances failed to increase reserves.

Remittances cover the trade deficit, but not enough to finance other external debts. During the first two years of this government, exports remained stagnant, but remittances showed healthy growth.

The situation has reversed now that exports are increasing and remittances are stagnating. Imports, on the other hand, are increasing at high speed.

The Pakistani rupee is the victim of trade and current account deficits. He continues to be under heavy pressure.

It approached its all-time low in December 2021. A low value of the rupee signifies an increase in the rates of all imported items.

Petroleum products, for example, cost more even if world prices are stable. Today, the impact on oil prices is devastating.

The rupee is trading at 177.50 rupees per dollar and the price of crude oil is $115 per barrel. Only a month ago crude oil was available at $92 a barrel and the rupee was valued at around 175 rupees to the dollar.

It is unclear how the government granted the current gasoline and diesel prices when world prices rose by $23 a barrel. Our finances would spiral out of control if prices were not adjusted to world rates.

Inflation has always haunted this government. It dropped slightly below double digits, but is on the move again. The depreciation of the rupee, the gaping budget deficit and high global commodity rates are thwarting the government’s efforts to control inflation.

Now is not the time for public appeasement. We must control all wasteful spending, especially subsidies which might provide temporary relief to recipients but create inflation which negates the impact of any subsidy.

Another merit that this government takes credit for is the steady increase in revenue. Most economic experts have pointed out that revenues have not increased due to the efforts of the Federal Board of Revenue (FBR).

The increase is in line with current inflation, falling value of the rupee and extraordinarily high imports. Once imports return to normal levels, revenues will also decrease accordingly.

It is the choice of economic managers to either maintain high imports and collect import-based revenues, or to reduce imports, which will also reduce revenues. The economy would remain under pressure if imports are not controlled.

The RBF should exploit other sources of income. To exploit this potential, tax officials should get out into the field.

They should confront vested interests. They would be forced to seize luxury vehicles whose owners pay no taxes.

They should seal many places built with black money without paying taxes. They should apprehend officials whose lifestyle does not match their income.

Those elected to national and provincial assemblies who avoid taxes should be the first to go behind bars. After all, they are the guardians of the rule of law in the country.

A flexible approach to tax collection would no longer work. A soft approach towards violation of rules and regulations is no longer viable. We are on the brink of disaster only because we tolerate the influential and punish the voiceless poor.

About Andrew Estofan

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