THE economy of Pakistan could be poised for a revival of growth in 2016, after languishing in low-growth equilibrium since 2008. Ever since the growth years of the Musharraf regime came crashing down, the economy has struggled to recover.

For almost five years, the predicament was described by the State Bank as ‘low-growth, high-inflation’ equilibrium. Along with this was a severe power crisis, brought on in large part by a severely constrained fiscal situation and low foreign exchange reserves.

But in 2015, the tide began to change. Reserves reached historic highs, even if on the back of borrowed money. And inflation fell rapidly throughout the year, picking up slightly only in the closing days.

As the tide turns, a window of opportunity opens up for the government in the year 2016, the first of its last two full years in power. Whatever the PML-N government is going to do, this is the year when it must get going.

It is worth bearing in mind that the promise of the moment owes itself almost entirely to fortuitous circumstances. The biggest stroke of luck came in the form of sharply dropping oil prices, which stabilised the current account even as exports and FDI fell. It also contributed in no small measure to the drop in inflation.

But the slide also brought in its wake unanticipated consequences that the government struggled to contain. More pointedly, the fiscal consequences of the slide in oil prices began to bite immediately following the first pass-throughs of the lower price in November 2014, necessitating resort to extraordinary revenue measures such as a sharp hike in the GST rate and an assortment of miscellaneous surcharges, to offset the negative revenue impact of lower oil prices.

So long as they were for the short term and meant to contain the immediate impact of a rapidly changing situation, these measures were fine. But over time, it became apparent that the government did not have many other ideas about compensating for the drop in revenues brought about by the slide in oil prices.

The absence of big ideas to manage the changing circumstances has been this government’s biggest constraint thus far, and 2016 will test this weakness to the maximum.

This is the year when the promise of CPEC has to take shape, but thus far CPEC projects are being executed without an overarching planning and coordination body (notwithstanding the attempts of the Planning Commission to perform that role) and without any serious transparency.

Power-sector reforms do not appear to be advancing, and privatisation appears to be stuck in limbo. Realising the promise offered by improving macroeconomic fundamentals is the big opportunity offered by 2016.

But the year will reveal whether that promise lives up to its transformative potential, or becomes just another short-term burst of unsustainable growth triggered by fortuitous, external developments of the sort that we have seen on many occasions in the past.

Published in Dawn, January 1st, 2016