IT appears that the State Bank has been told to tone down its warnings on the economy`s increasing vulnerabilities. After clearly pointing towards the growing current account deficit as a source of serious concern in the fiscal year, its third quarterly report released just after the Eid holidays omits all expressions of alarm. This is surprising because the jump in the current account deficit is most pronounced in the quarter. In fact, it is the highest quarterly deficit posted by the economy since the second quarter of 2009. One is left wondering why so little is said about this rather `impressive` jump this time when far smaller spikes triggered expressions of concern in previous quarters. The only explanation seems to be that the State Bank has been told to paper over the concerns it has been flagging all year, because they were taking the air out of the government`s claims it had turned the economy around.

But even the blandest presentation of the facts cannot obscure the troubling aspects. While the report tries to paper over the impact that the current account deficit has had on the reserves, the reality is that the State Bank`s foreign exchange reserves had dropped by $3bn by March, after hitting a peak of $19.5bn in October 2016. These are still ample to cover imports of up to four months, but that ratio is also coming down with the passage of time. After trying to point out that official inflows to plug the gap continued, there is no option but to add that these `were not sufficient to fully offset the widening in the current account gap`. On the financial account, the report tries to highlight a spike in FDI, but cannot escape the fact that 86pc of the major inflows of $4.82bn that came in during the year were debt creating. `Pakistan`s external account has come under pressure due to an unfavourable trade balance,` the report notes correctly, before throwing the ball into the court of the private sector, arguing for greater `entrepreneurial spirit` and putting long-term growth before short-term profits. A brief mention of the importance of continuing reforms merely touches on the government`s responsibility in the whole affair, as it only points out that a `brief window of opportunity` was provided by low oil prices and an IMF programme needs to be supplemented with continuing reforms.