Dealing with our economic emergency

Pakistan is facing the worst economic crisis of its history. The balance of payment has soured to such a level that the trade account deficit has widened manifold. This situation has led to an increase in the current account deficit, which has climbed to $18.0 billion, which is 5.7 per cent of GDP and stood at 4.1 per cent last year of same time period.

As a result,a fall in foreign reserves is being observed;it has a direct relationship with the value of the Pakistani rupee. The help of international financial institutions is imminent, therefore the International Monetary Fund (IMF) bailout cannot be ruled out. The situation is not favourable for Pakistan, since it was recently placed under the FATF grey list. On top of these problems is the issue of water scarcity. Rapid construction of dams by India on waters coming from eastern rivers into Pakistan is the most dangerous phenomenon to have appeared. The trade war between USA and China is another problem indirectly facing Pakistan in shape of a rise in cotton prices, where China is buying cotton from Pakistan and India instead of the USA.

China Pakistan Economic Corridor (CPEC) could be a game changer project, had the previous government negotiated it on the discussion table well before its final execution. The great plan is still unclear to the public and therefore speculations are at their peak. The newly established government should immediately focus on CPEC projects and their impacts on Pakistan’s economy, whether positive or negative.

One of the major negative impacts is trade imbalance. This trade imbalance can be protected by revamping the Free Trade Agreement (FTA) with China. Pakistan should negotiate with China to import its agriculture products, which can result in earnings upto $12 billion, as China imports food amounting to $120 billion, out which a 10 per cent can be our share. Moreover, Iran also imports food amounting to $65 billion where food products can be exported to this US-threatened country by bartering oil as payment.

Under CPEC, Chinese partnerships with local manufacturers will not only help GDP growth, but will also generate employment and business opportunities by empowering small medium enterprises (SME). This partnership is possible by attracting private equities companies and venture capital companies from across the border. China may invest into these companies not only to manage and boost the manufacturing process of SMEs in Pakistan but to also earn better profits.