As Pakistan is getting ready to usher in a new government, the nation's economic trajectory is a focus of attention. The question that looms is whether the change of guard in Islamabad can truly steer Pakistan's economy out of its challenges or if the perils persist despite recent promising macroeconomic indicators that reflect a positive trend compared to the previous year.

During the last few months, fiscal consolidation maintained its course, foreign exchange buffers improved, and the current account deficit narrowed, suggesting a robust economic foundation. Yet, a closer look reveals the undercurrent complexities and uncertainties.

For instance, take the example of headline inflation (including energy and food prices). It has receded from 38 per cent to around 30 per cent from May 2023 to January 2024. However, substantial energy price adjustments (including the latest increase of Rs7 per unit in the electricity tariff) pose a challenge to disinflation. The precarious global energy market, marked by disruptions in the Red Sea supply route, adds additional risk. Any hike in global fuel prices will escalate inflation in Pakistan.

Likewise, the government's pledge to reduce food prices hinges on factors such as weather conditions and the ability of provincial governments to curb hoarding and profiteering. Initiatives like the establishment of a dedicated department for price control by the new chief minister of Punjab indicate a proactive approach. One hopes such initiatives will be replicated by other provinces, too. However, the actual relief from food inflation depends on the success of such measures.

While positive strides in exports compared to the previous fiscal year offer a glimmer of hope, concerns arise when analyzing the contributing factors. The low baseline impact boosts export........

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