Pakistan’s economy is in the woods, and it is impacting national security in the long run. The country’s desperateness to strike a deal once again with the Washington-based lender, the IMF, has come with severe geo-strategic crosscurrents. The Fund is out to fleece a pound of flesh and wants it to be bloodless. Thus, a check-list of reforms extended by the donor is encroaching upon the economic vibrancy and that too at the altar of pushing millions more below the line of poverty. A rough estimate says that 10% of the populace has further slipped into the abyss of degeneration in the last two years, and are in a fix in making their ends meet. This syndrome is ironically coupled with a soaring unchecked elite culture that is furthering parochialism, and risking survivability of the state in itself.
The statistics at hand are disturbing. Pakistan has technically entered its 24th IMF program, and is still clueless whether it will work or not. All tall claims of shutting the door on the Fund and breaking the begging bowl are ions of fiction that are there for amusement, if desired. The fact is that the country never was on the path of self-reliance, and the module of revenue generation, spending and development was elite-pitched meant to serve those at the helm of affairs.
A redundant bureaucracy, a brigade of Convent-inspired advisors and spineless political dispensations have played havoc with the economy, and with the future of 245 million people.
Today, the country sits at the brink of default, and it is solely being run on the premise of an informal and undocumented economy under the influence of black money. No doubt, the elite capture is at the vanguard and the contract at work between the state and the people is worse.
A glance at budget FY 2024-25 brings to fore the following: Out of a total outlay of Rs18.7 trillion, less than 20% is earmarked for development and social mobility. Debt-payments have increased by about 18% to the tune of Rs9.8 trillion. The defence pie has swelled to Rs2.13 trillion, along with an untenable large size of government where 1.92 million federal employees with little or no contribution in progression of civil service are a burden on the national exchequer with perks, privilege and pensions.
It is irksome that education and health are neglected affairs and have never been a priority for even appropriate allocations, apparently sealing the fate of a regressive society. Last but not least, a staggering revenue generation target of Rs13 trillion, 40% higher than the previous year, is up for a grab under the noose of corrupt tax machinery. Likewise, 40% excess burden of taxation has been slapped on the salaried class, with a tender pat on the wrist of big-businesses as they are largely out of the tax net.
So what is the way ahead, and what are the concerns that are a writing on the wall?
As Pakistan is in pursuit of another $8 billion from the IMF, it has crisscrossed with some adverse inputs from global financial stakeholders.
Moody’s has categorically expressed its concern over weak debt affordability and believes that the plummeting affairs will drive high debt sustainability risks. The leading global rating agency is worried about the count of interest payment on debt-servicing.
Fitch, another American credit rating agency, foresees a partial implementation of the proposed budget, and is prophetic in predicting another indispensable bailout from the lenders. That has made Islamabad sign on the dotted line as it is now officially part of Resilient and Sustainability Fund (RSF), on the heels of an exhausted Extended Fund Facility (EEF) that had made the nation bleed.
This new program has pushed the country over the brink as this desperate cash injection will come by invoking the maximum Strategic Drawing Reserves (SDR) limits, plunging credit and investment rating to new lows. Similar is the case as Islamabad is hopping between Abu Dhabi, Riyadh and Beijing, and is eager to solicit over-rolling of $12 billion soft loans, along with new ones to its coffers.
The situation, with the abrupt cancellation of IMF Board Meeting is supposed to decide on the new cash tranche on August 30, has pushed the financial gurus to undertake sojourns to commercial banks in the Middle East to overcome liquidation exigency.
FIXING THE FOX!! The trial, error and tribulation of our sorry economic state of affairs boils down to a couple of indispensables:
Rule of Law: The necessity is to put our house in order and ensure that we come out of the prevailing circus that has bred discontent, political instability and insecurity. The earlier we decide to accept the reality that we had flunked and gone wayward, the better.
The hallmarks of rule of law and abiding to the Constitution are a must. That has been one of the pinnacle riddles as international investors and donor agencies were scared of the path that we had choreographed for us, and were demanding political stability and resourcing to rule of law.
Capital is only parked by investors when they are assured that their return is profitable, and in case of litigation, the process will be smooth and result-oriented in all fairness. Have we enabled that decorum? The answer is ‘No,’ and we are deep in a mess!
Corruption: Pakistan is infected with deep-rooted corruption, and its traces are all over. It is a reality that ad-hocism has pushed us over the cliff, and we as a nation have started believing in short cuts, rendering the edifice of the state and national institutions in disarray.
Notwithstanding, trillions of rupees of litigation that are pending the light of the day in local courts and the one-way traffic through which the mighty get their way, has shaken economic confidence to the core.
Doling out ‘clean chits’ in open and shut cases of misappropriation and embezzlement is our recent history, and we are all in it. Moreover, the Panama and Dubai Leaks are just the tip of the iceberg of our money-stashing obsession abroad. Perhaps, the downtrodden and tarnished nation will never come to see the day when the looters will ever stand a trial and the siphoned off money is retrieved. This is another aspect that has rusted us from inside out, and the economy is moth-eaten at the hand of all-prevalent corruption, which is now regarded as the ‘New-Normal’.
Retiring debts: Pakistan’s total public debt and liabilities are to the tune of $223 billion, of which $130 billion are due payables. During the current fiscal year, the country needs, at least, $7 billion to overcome sovereign commitments and installments, and there is no exit from it. This goes on to underscore that the ship is in rough waters, and berthing it in the ocean is not an option. The remedies that we have time and again tried are in the form of seeking more loans to retire old ones, rescheduling the timeline for get-away comforts, and selling our national assets at throw away prices.
It is an enigma that none of the national asset be it ports, airports, parks, monuments, mineral zones or highways are free from encumbrances, and consecutive governments have used it as debentures to stay afloat at the cost of undermining the country’s sovereignty. Getting out of this trap is a must, and it poses an existential crisis.
CPEC-2: Pakistan’s lifeline is geo-economics but we have used this phrase for academic discussions and window-dressing. The $60 billion Chinese investment in the form of China-Pakistan Economic Corridor (CPEC) is a half-baked reality.
Balochistan, the theatre of CPEC, is in revulsion and the locals are not on the same page. Development has been lopsided and it is another grim reality that we have not been able to set up the proposed nine Special Economic Zones in the first decade of the program. With CPEC-2 underway, and development entering into industrialization stages on the sound footing of energy and communication projects, it’s time to buckle up the economy and give our best in production. Then only we can overcome stagnation and reap the benefits of connectivity in the region and beyond. Opening up with India is essential, and it is high time the paranoid-ism of history takes a back seat to overcome disgust and apathy.
End of Elite Culture: It is a given that we cannot go ahead anymore with the luxuries with which we are pampering the elite culture. Cutting down the size of the government, scrapping all undesired ministries/departments and doing away with perks and privileges is sine qua non for moving ahead.
It is a crime with a hapless tax-burdened nation to afford a bill of Rs8 trillion, to foot salaries, pensions, perks and privileges from the national exchequer which carries a staggering Rs6 trillion budget deficit.
This is unacceptable and cannot go on. What a rude joke with the nation that senior bureaucrats, are paid for their electric, telephone, rental and petrol bills, apart from being paid a lucrative salary, and a pension bill that is now around Rs. 2 trillion.
Energy Sector: Pakistan has a regressive energy policy and it is not taking it towards growth and development. Soaring prices of petroleum products and incompatible electricity and gas tariffs have scuttled progress. It would not be an exaggeration to say that the power sector has become a zombie zone, and it is out to suck the blood of the economy.
Pakistan’s electricity prices are highest in the world, at a staggering Rs60 per unit kilowatt, which has made our produce uncompetitive in the region, and the world at large.
The prime forex earner, the Textile sector is biting dust, and there are hardly any exports left behind to pride, and things are going worse with the induction of an Internet firewall, delivering IT sector and Online marketing a stab in the back.
The zombies in this paradigm are the 100-plus Independent Power Producers (IPPs) who are thriving by grabbing Capacity Payment deals under a scandalous and irrational agreement signed with the government. Again it is the elite capture wherein reportedly 40 odd families are fleecing the economy and the state is playing fiddle.
Vocational Education: Pakistan needs a paradigm shift, if we need to stage a comeback at home and on the international employment canvas. Our youth and workforce, despite being one of the most industrious, are lagging in vocational and technical talent, and this is where the regional competitors are enjoying an edge in the Gulf, ASEAN and European markets.
It’s time for a concrete course correction to end this black hole syndrome of economy, and follow the Chinese module of uplifting 70 million people from the abyss of poverty. More than 100 million people are below the line of poverty, earning less than three dollars a day, and another 60 million learned youth are denied equal opportunity employment despite being tech-savvy. This makes our labour productivity one of the lowest. This enigma is eating into our vitals and is suicidal in essence.
To quote celebrated economist, Dr Kaiser Bengali, Pakistan has already defaulted, and it is a ‘Casino’ economy in vogue. He rightly says that we have bid adieu to industry and production, owing to high cost of energy, and have conveniently slid into real estate and bourses to enjoy the bounties while relaxing back on funds.
This is an antithesis of development and wealth generation, wherein industry is buoyed into a chain reaction of positivity and production. The sitting hallmarks are: an inefficient and corrupt socio-economic decorum that believes in ad-hocism and thrives on selling the fear of the unknown to stay put in power. It’s the economy stupid, and is in need of being fixed!
