While Pakistan is about to successfully complete the IMF’s three-year stabilisation programme focused on balance of payments support, its external sector is coming under mounting pressure from multiple sources: falling foreign investment from traditional sources and slower growth of remittances marked by a sharp drop in actual figures last month. This has come on the back of sagging exports for the last three years and rising imports despite lower oil prices.

The positives are: comfortable foreign reserves and the capital and financial inflows expected from China for CPEC projects.

That said FDI from China dropped in July making overall inflows for the month fall to 16.4pc from July 2015. The demand for foreign exchange is likely to surge as economic growth picks up, though the implementation of CPEC projects has yet to gather momentum during this fiscal year as anticipated by the authorities.

However, the uncertain outlook on the external front has not dented Finance Minister Ishaq Dar’s confidence that Islamabad will not go back to the IMF for another credit facility.

A higher growth trajectory may allow him to access the international market for a costlier, but limited, amount of credit. Not much hope can be pinned in this area though as the worrisome performance of the external sector in July — almost coinciding with the conclusion of the IMF programme in early September does not seem to be a good beginning for a faster growth this year.

A more durable solution lies in home-grown strategies to tackle persisting major problems that stand in the way of making the national economy globally competitive, both quality- and price-wise

The IMF programme was basically designed for fire-fighting and did provide a breather — short time and space--for removing imbalances in the economy. Long-term structural reforms could not be carried out in a 3-year period.

A more durable solution lies in home-grown strategies to tackle the persisting major problems that stand in the way of making the national economy globally competitive, both quality and price-wise. This is not difficult to achieve at least in areas where the country has domestic advantage, reinforced by human capital and technology. All it requires is a review of our current economic growth model.

Given the present domestic and global landscape, export-led economic growth or export-oriented industrialisation seems not to be the best option; at least for the time being.

The barriers to exports are multiple: fairly subsidised global trade, competitive currency depreciation, rising protectionism since the Great Recession and a tardy global recovery.

Many local export-oriented industries are finding domestic sale outlets for their goods and services. GDP growth is domestic consumption-led, it is neither savings, investment or export-led. Things are moving in a direction where trade surpluses in excess of domestic demand are to be exchanged in the international market replacing the earlier policy of subsidised export-oriented industrialisation.

There is a need to revisit the foreign trade policy with a shift of focus on import substitution. The import list needs to be scrutinised with a view to producing goods locally and saving foreign exchange. Allowing the rupee to depreciate to make import goods expensive or exports cheaper is not enough to minmise trade deficit or achieve a balanced trade regime.

Apart from exports, foreign direct investment from traditional sources is also drying up (except from China), though FDI is generally more profitable than short-term investments.The FDI trend coupled with slowing remittances will heighten the pressure on the balance of payments position.

Somehow the disconnect between money and productive investment is widening globally, resulting in a reduced role for the troubled global financial system in economic development and growth.

And much of the finance capital tends to benefit a few, resulting in social exclusion. Brexit is the product of such an exclusion. The EU has benefitted from the UK’s big business, but once capital exits national boundaries it loses its links to national social progress.

US presidential candidate Donald Trump is thriving on the dissatisfaction of the unemployed or under-employed feeling threatened by cheaper migrant labour. Like the Democrats, he too proposes to offer a one-off tax incentive to attract funds stashed in offshore islands in order to speed up US recovery.

In the changing market scenario at home and abroad, things cannot be done solely in the old ways. The dynamics of growth are changing with segments of the economy growing on their own momentum through the new ideas and the latest technologies. Those reluctant to move with the times will sooner or later be left behind.

Published in Dawn, Business & Finance weekly, August 22nd, 2016