IT is highly worrisome to note that the economy has continued to deteriorate over the last six months. The Asian Development Bank has forecast 4.5 percent growth, which is below the 5.5 percent targeted by the government. This is understandable on account of the economic woes the country is currently going through. It suffers from the double whammy of budget and current account deficit, falling rupee value, shrinking forex reserves, and unending power shortages. The inflation is highest in the last decade and half. The stock market has fallen to a 28-month low. Domestic debt has surged by 137 percent to hit a historic level of Rs 3.26 trillion in FY08. With liquidity drying up, the cost to protect $2.7 billion sovereign bonds from default is increasing. The financial crunch the government faces has led to a phenomenal inter-corporate circular debt that has forced the private sector energy companies, who are touching their borrowing limits, to shut down a number of power production units further adding to the power shortage. Much of these economic woes emanate from the skewed economic policies of the Musharraf era based on a development strategy that prioritized sectors providing fewer employment opportunities and allowing the transfer of huge profits abroad. Besides adding to the number of the unemployed, the policy failed to provide enough revenue to the state. The new government's preoccupation with political crisis, partly caused by its own faults, diverted its attention from the economic challenges. There have been reports of an imminent sovereign debt default, which can hopefully be avoided now on account of the falling price of oil, reduction in subsidies and larger remittances compared to the last financial year. The IMF has underlined the need for substantial external financing. What the government needs to do is to revive the economy rather than depend entirely on foreign assistance. It has to revise its economic strategy giving priority to sectors like agriculture and industrial production, which provide a larger number of jobs, help improve the balance of payments and add substantially to the government's revenues. Besides being sustainable, economic development has to provide urgent and visible relief to the masses. One hopes that as the cabinet is expanded next month, the ministries related to economy are manned by competent people. The government has meanwhile to take measures to bring down political polarisation and improve the law and order situation through a multi-pronged strategy rather than brute force.