A debacle in the
making?
Rashed Rahman
Despite the
controversies surrounding the Pakistan Tehreek-i-Insaaf’s (PTI’s) ‘victory’ in
the 2018 elections, this may not turn out to be what this government is likely
to be remembered by. If anything, it will be remembered for its inept and
disastrous handling of the economy. Even diehard supporters of the PTI have
been silenced by the disastrous handling of the economy by the PTI government
and its Finance Minister Asad Umar. The basic flaw in the government’s approach
to economic matters is its inability to climb down off the container from its opposition
agitation days and realise the demands of governance in a fragile economic
state.
The government’s
mantra that all our economic ills were inherited from the past two governments
of the Pakistan People’s Party (PPP) and the Pakistan Muslim League-Nawaz
(PML-N) has by now worn thin, eight months almost into the PTI government’s
tenure. Certainly, it must be conceded that at least the narrow focus of the
previous PML-N government on infrastructure (mostly associated with CPEC)
produced imbalances and deficits on the external and internal front. The path
chosen by the PTI government to tackle that legacy has been shortsighted,
contradictory, and resulted in sending the already shaky confidence of the
business community into a tailspin. The latter has responded according to
capitalist logic and investment is therefore conspicuous by its absence. When
domestic business is not forthcoming, how can international investment be
reasonably expected?
The government
has been caught in the cleft stick of attempting to boost tax collection (often
through misguided draconian measures) to control the budget deficit. Its
‘austerity’ measures have turned out to be little more than cosmetic, surface
steps that have not made any appreciable dent in government spending. The
likelihood of missing the revenue targets and inability to curb running
expenditure means the development budget will see major cuts. That in turn will
impact GDP growth.
All this and
more can be found in the World Bank’s (WB’s) latest South Asia Economic Focus
report that forecasts a deceleration of growth to 3.4 percent in Financial Year
(FY) 2019 and 2.7 percent for FY2020. This is a far more pessimistic outlook than
anything the government, IMF or the Asian Development Bank have come up with so
far. To put this forecast in perspective, Pakistan will only be ahead of
Afghanistan (some feat!) and behind even Nepal in South Asia. The WB explicates
in its report the trajectory of Pakistan’s critical economic indicators.
Domestic demand will contract (this is already in motion), export growth will
be gradual. Services, which had been leading growth in recent years, will
decline to 4.4 percent in FY19 (cf. 6.4 percent in FY18). The two key sectors of
the real economy, agriculture and industry, will also witness significantly
lower growth in FY19 and FY20. The WB report is more optimistic about FY21 (4.0
percent growth), based on the dubious propositions of structural reforms’
effect and improvement in macroeconomic conditions. This optimism is not
explained or substantiated, at least as far as media reports are concerned.
Illango
Pattchamuthu, WB Country Director for Pakistan, reminds us of the obvious when
stating: “Pakistan’s growth must be driven by investment and productivity,
which will put an end to the boom and bust cycles that affect the country every
few years.” But he does not explain where the money for investment will spring
from, nor how, in a depressed economic climate, productivity will improve (which
implies technological modernisation and even innovation). Our flagship export
sector, textiles, has languished for many years and been overtaken even by
latecomers to the party such as Bangladesh because of failure to modernise and
add value to its products. The main preoccupation of the textile sector in our
country, from the very beginning when some parts of it were set up alongside
private enterprise by the state and then handed over to blue-eyed boys in the
early years after Independence, has been lobbying every government for
concessions. Its malaise is not untypical of the rent-seeking, inefficient
sections of the industrial sector of the country as a whole. Nor does the
worthy WB Country Director enlighten us how Pakistan can, even with investment
and productivity, avoid the inherent boom-bust cycle that afflicts capitalism
per se and which has been demonstrated in practice over at least 200 years.
The PTI
government, unable to stabilise the economy or rein in galloping inflation so
far, has taken recourse to adding to its election campaign promises of building
five million houses and providing 10 million jobs by announcing some ‘package’
or the other every other day. This may provide brief positive optics, but all
too soon is overtaken by that nagging, persistent question: show me the money.
Given the precarious state of the economy and public finances (not to mention
the increase in military spending because of the tensions on our eastern
border), all this sounds like pie-in-the-sky.
People are
groaning under the ever-increasing burden of inflation that has doubled since
this government took office. While Finance Minister Asad Umar ‘reassures’ the
public that their howls and screams because of inflation will increase for the
foreseeable future, another worthy minister advises people to eat one roti (bread) instead of 2-3 to affect
savings for the state. It is becoming increasingly doubtful whether the poor,
nay the vast majority, are able to even afford 2-3 rotis in the first place. Marie Antoinette would have been proud of
such ‘protégés’.
Meanwhile the
partisan, politically motivated, heavy-handed National Bureau of Accountability
(NAB) drive against the opposition leaders is forcing them, apart from pressure
from their own ranks, to join hands against the government. While Asif Zardari
has given what may be a premature threat to overthrow the government through a
long march, this may owe more to being pilloried in cases such as the fake
accounts matter than any serious attempt to mobilise. PML-N has its own
problems with the judiciary (despite former Chief Justice of Pakistan Saqib
Nisar’s denial of any political motive behind the disqualification of Nawaz
Sharif) and NAB, and is still mulling the best response. Maulana Fazlur Rehman
has been railing against and asking for the overthrow of the PTI government
since his electoral defeat in 2018. However, the glue that could bind these
disparate and from time to time feuding parties has still to be seen.
The problem for
the people is the lack of hope of better times from any of these factions of
the ruling elite. If corruption is the original sin, let him who has never
indulged cast the first stone. A movement to champion the rights of the people against
the state, its overweening institutions, and a corrupt and venal ruling elite is
still awaited.
rashed-rahman.blogspot.com
No comments:
Post a Comment