ISLAMABAD: The Pakistan Economy Watch (PEW) on Sunday said the monetary policy of the State Bank has exposed the tall claims of rapid economic development by the former government and confirmed that economy is sailing in troubled waters.

 

Hike in the discount rate also indicates that now policymakers are preferring stabilisation over the economic growth which will initiate the process of contraction of the troubled economy, it said.

 

Economic contraction will result in unemployment and cuts in the developmental budget which will hit the social sector, said Dr Murtaza Mughal, President PEW.

 

He said that the deficit has reached 6.8 per cent surpassing the target of 5.5 per cent while the current account deficit from July to May has reached to 16 billion dollars which were 11.1 billion dollars during last year.

 

The government is failing to control the situation despite repeated erosion in the exchange rate, it has failed to boost exports substantially or reduce unnecessary imports which have taken a toll on the forex reserves, he said.

 

Murtaza Mughal said that a little improvement in exports and remittances aren’t enough and the government will be compelled to revise petroleum and electricity prices but it will not save it from knocking the door of IMF as billions of dollars are needed to keep the country from bankruptcy.

 

He said that water scarcity has been damaging the agricultural sector on which majority of the population depends while manufacturing is to take a hit from increased interest rates.

 

The caretaker government has started the groundwork for the IMF loan but it is leaving the final decision to the elected government which is very encouraging, he said.