The Treasury Secretary of the Trump Administration, Scott Bessent, says the US has a strong currency policy, but that doesn’t mean that other countries have got to have a weak one.
Though the outlook for getting fairer purchasing power parity for different currencies against the dollar may be improved by the US de-globalisation policy, it seems unlikely to happen in the immediate future in a meaningful way. However, Pakistan can also, apparently, draw some form of moral support for its policy to manage a relatively stable local currency from Mr Bessent’s observation regarding the ongoing tariff confusion due to lack of clarity.
His statement coincides with a report in The New York Times: “Tariffs have been threatened, announced, cancelled, delayed or enacted — sometimes in a matter of days or even hours.”
This goes to show how ill-prepared the US president and his team were in carrying out one of his most important electoral promises in the fast-developing multipolar world with multiplying complexities.
Unless the government shifts its focus to human development, no number of grants and loans can help the economy make impactful and sustainable headway
In navigating the ever-changing global market, analysts at The Economist see slower growth in North America in 2025 that, they say, will be offset by faster expansion in Asia, Europe, the Middle East, and Africa.
Addressing the United Nations (UN) Security Council, Pakistan’s foreign minister Ishaq Dar called for sweeping global reforms for a more inclusive international order. He stressed the need for “a system that is more democratic, representative, and accountable, one that truly serves the interests of all nations rather than a privileged few”.
‘When capital crosses its national frontier in worldwide search of greener pasture, it loses its link with social progress’
Mr Dar said the existing structures have failed to resolve longstanding conflicts and economic disparities. He underscored the urgent need to reconstruct the UN and global financial institutions.
Similarly, China, with shared views, says a multipolar world has become an unstoppable trend. For too long the existing international order has been shaped disproportionately by a handful of Western powers which have sidelined the voices and needs of the developing nations.
The Chinese point out that the rising divisions between major powers and conflicts under differing order models are hindering unified response to global challenges. They call for de-polarisation, emphasising the necessity for significant reforms within the international order to address the issues.
Amidst the changing global domestic and external situation, Pakistan’s foreign debt inflows have dropped, and foreign direct investment (FDI) has increased from July-January to the same period last year. Foreign debts plunged by 38 per cent to $4.585 billion from $6.31bn. Meanwhile, FDI surged by $0.55bn or 56pc to $1.52bn from $0.975 trillion. But at this point in time, it does not appear that FDI inflows will continue to follow a stable trend.
To quote a Pakistani social scientist, “When capital crosses its national frontier in worldwide search of greener pasture, it loses its link with social progress.”
Going by various research reports, business confidence is improving in Pakistan, but concerns persist regarding real economic performance, particularly the lacklustre productivity in export-orientated and import-substituting economic activities and the low level of employment generation.
After registering surpluses in the previous five months, the current account posted a deficit of $420m in January 2025 despite a nearly 16pc jump in textile exports during the month compared to a year-ago period.
Now, the World Bank has pledged to provide long-term financing amounting to $40bn, half of which will be invested in the private sector by the International Finance Commission and an equal amount in development.
It is essential that priority should be given to people-centred socio-economic development and for reviving private sector investment to increase productivity, reduce foreign dependence and achieve self-sufficiency.
Referring to the World Bank loan offer, analysts at Dawn say any investment in an area critical to human development must be welcomed, given our enormous financial needs. But, they point out, no such investment — no matter how big — can make the desired sustainable impact without social sector reforms. Unless the government shifts its focus from brick-and-mortar projects to human development, no number of grants and loans can help the economy make impactful and sustainable headway.
International relations are an extension of domestic policies. With the faltering, West-led financial globalisation, the US is abandoning free trade and trying to promote industrialisation by raising tariffs, while Pakistan now stands at a crossroads: embrace the arduous path of implementing the necessary reforms or persist in unsustainable borrowing, risking prolonged stagnation, says analyst and investor Mirza M. Hamza.
Published in Dawn, The Business and Finance Weekly, February 24th, 2025
