The messy economy

In a little over eight months of this fiscal year (between July 1, 2022, and March 3, 2023), the PML N-led federal coalition government borrowed Rs1.961 trillion from commercial banks to fill in fiscal gaps in its revenue and expenses. During the same period of the last year, the then PTI government had borrowed about one-third of this amount —Rs619 billion, according to the State Bank of Pakistan (SBP). This is one big piece of evidence of the seriousness of the ongoing fiscal crisis. But the crisis is not entirely of the current regime’s making. Fiscal imbalance expanded phenomenally during the last year of the PTI government — and the current government only contributed to its further expansion. The fiscal deficit, or the gap between the government’s income and expenses, has been at the heart of the ongoing external account crisis. As of March 10, 2023, SBP’s forex reserves totalled $4.319bn. In end-March 2022, less than two weeks before the ouster of Imran Khan as prime minister, the central bank’s reserves stood at $11.425bn.