Although weaknesses could be found even in the best of situations, positive signs could easily be deciphered. Both fiscal and external deficits are under control, foreign indebtedness has declined, debt servicing obligations are manageable, inflation is down, growth is picking up, stock market is booming, banks are flushed with liquidity, lending rates are at very low levels, rupee rate is generally stable, foreign exchange reserves are at record high level and credit rating of Pakistan has greatly improved.
The country which was at the verge of bankruptcy or actually bankrupt due to its inability to meet foreign exchange denominated obligations only a few years ago is now paying expensive debt in advance of the due dates and refusing the offer of IMF to negotiate another programme after the expiry of the present PRGF.
Obviously, such a welcome change in fortunes was the result of both external and domestic factors.
Pakistan's decision to side with the international community in its fight against terrorism and huge inflow of foreign remittances caused by the panic in the expatriate community for the safety for their funds abroad had a salutary effect on the balance of payments and reserve position of the country.
On the domestic front, the government did not shy away from taking harsh decisions. A rigid reform agenda in close collaboration with the multilateral agencies was followed and structural adjustments were made wherever necessary. Pakistan's position was in a way almost unique in certain respects.
Except poverty and unemployment, all the other variables recorded handsome gains and the economic team of the country claimed most of the credit for the turnaround of the economy, although it may be added that in the past success claims were sometimes made even without solid gains.
It may be recognised, however, that in a free market economy such a smooth sailing is not possible on a perpetual basis. If it were so, developed countries would not be facing any problems and their citizens probably would have been in the seventh heaven by now.
The fact of the matter is that sooner or later problems emerge which have to be tackled by taking unpleasant decisions.
The recurrence of trade cycles, unemployment, inflation and stagnation in economic activity are some of the regular features of a free market economy which have to be countered by appropriate policy actions.
In Pakistan too, after a prolonged improvement in most of the major indicators, certain policy changes need to be considered seriously to correct the emerging weaknesses.
For instance, as the latest price indices indicate, inflation which was under control during the last few years is knocking once again at our door. If unchecked, it could retard our development effort and make the lives of ordinary people much more miserable. But the indications from the State Bank are less than animating.
It is perhaps of the view that fighting inflation through interest rate increase would be inimical to growth and employment of resources, including labour.
Also, it would dampen the stock market and may burst the asset bubble by redeployment of liquidity in interest yielding financial instruments. Besides, the rise in interest rates could be highly pinching, in certain cases devastating, for the people who secured loans from the banks for buying houses and other durables in the hope that their net liability would diminish or remain constant in the years to come.
Value of the rupee is another example of shying away from the realities. People have been made to believe that a constantly appreciating rupee is the manifestation of good health and sound management of the economy.
Authorities have become somewhat nervous and are now trying to pursue the market players not to let the rupee depreciate beyond a certain level when deficit in the trade balance is widening and some other factors are calling for correction.
Such a behaviour seems to be the product of delusion of having mastered the skill of doing everything perfectly at all times and possessing the power to improve all aspects of the economy simultaneously.
Our economic managers may be exceptionally competent but they should understand that they cannot have the best of both the worlds and most of the time there is a trade-off in economic policies.
Instead of claiming credit for everything on earth, they should go a step further and try to educate the people about policy limitations. Unfortunately, there is no such precedent.
Whosoever is at the helm indulges in unnecessary propaganda and raises the expectations of the people.
With the passage of time, he finds himself in a self-made web from where he finds it difficult to unhinge.
In our view, the present economic team has the capacity to rise to the occasion and take timely decisions in vital areas of economic management.
Policies like declining interest rates and appreciating currency are not suitable policy options forever.
US interest rates are definitely going to move up; we would be starting the new financial year with CPI touching 6 percent, the gap between kerb market rate and the official parity between the dollar and rupee widening; holding on the reserve level at $12 billion plus and at the same time opting for early debt repayment is going to be a tough act.
The strategy, therefore, has to be adjusted in keeping with the changed realities. Policy makers of the past made a mess of the economy because they delayed the inevitable decisions for too long.