Pakistan’s economic pitfalls – risks versus stability

As Pakistan braces for the terrible consequences of climate change amid heavy monsoon rains and related casualties, the official claim of returning economic stability sounds just too hollow to be taken seriously.

Notwithstanding the long delay in securing a new IMF loan and the failed closure of the previous one, prime minister Shehbaz Sharif’s government has missed no opportunity in blowing its own trumpet in the past week.

The message proclaiming ‘sub achha’ or all is well has tragically coincided with warnings of heavy rains and possible floods in the coming days, not to forget the death toll already reported. It is a frighteningly powerful reality coming less than a year after devastating floods across Pakistan just last year uprooted millions of people and caused losses ranging in the multiples of billions.

Even the questionable record of finance minister Ishaq Dar in allowing a dangerous slide in Pakistan’s outlook was largely ignored, with the prime minister instead recently showering praise upon him. The minister’s record stands in sharp contrast to that of Miftah Ismail, the former finance minister under the PDM government, who successfully steered Pakistan towards the release of the IMF’s last payment of about U$1billion before he was summarily removed.

In a rare gesture with few precedents in memory, the ruling elite gathered in Lahore on the second day of Eed ul Azha to profusely celebrate the successful staff level agreement [SLA] with the IMF for a $3billion loan, expected to last till April next year.

The event-a ceremony held under the glare of TV cameras witnessed the finance minister and the central bank governor sign on the SLA-an exercise no more than a bureaucratic formality in the past, when a succession of finance ministers simply signed the document before dispatching it to the IMF’s headquarters in Washington DC. But today, the reality of Pakistan is vastly different and potentially tragic.

In the past week, the government has eagerly celebrated securing Pakistan’s 23rd IMF loan with gestures such as a further expansion of gifting laptops to students across Pakistan. Exactly how giving free laptops to students will turn the corner for Pakistan’s economy at a critical juncture, remains unarticulated.

It is a powerful reminder of the early 1990s when Sharif’s Pakistan Muslim League-Nawaz [PML-N], then led by his elder brother Nawaz Sharif, oversaw the distribution of up to thirteen thousand yellow cabs to unemployed young people, without collaterals.

That exercise became a financial disaster when owners of those vehicles stopped paying their dues, eventually saddling public sector banks with a huge baggage of bad debts. Anecdotal information then witnessed some of those yellow cabs with Pakistani number plates conveniently plying across Afghanistan, out of reach of Pakistani authorities.

Dishing out funds under one fanciful scheme after another without a clear sense of purpose and adequate safeguards, only smacks of a bad policy. More fundamentally however, the latest IMF loan must be seen as no more than emergency economic medicine, only fit to keep the patient alive without a sustainable path to returning from the ICU to a road to recovery.

As Pakistan grapples with the worst economic crisis in its history, the road to the future must be armed with three inter-related areas of sharp focus.

First, the large number of Pakistanis who continue to remain unregistered as tax payers must be brought under a sweeping focus. Those with means must be forced in the tax net as Pakistan faces a tough battle for its very survival. Unless an emergency push in this area irrespective of political costs is undertaken immediately, there will be no prospective light at the end of Pakistan’s economic tunnel.

Second, the road to undertaking developmental planning led by a revamping of Pakistan’s agricultural sector needs to be reassessed as never before. In this formidable battle for Pakistan’s very survival, tough questions must be addressed squarely. For instance, is it more beneficial to work on a war footing to lift Pakistan’s immediate agricultural output to tame spiraling food prices than giving out free laptops, is a definite case in point. The answer to that question will present a key solution to the multi-tiered riddle surrounding Pakistan’s future.

And finally, just how Pakistan can best be ruled through an emergency push to tackle its crisis of governance is a long overdue challenge in need of being tackled. This is essential in view of Pakistan’s terrible history. Presenting some of the best strategies to lift the country’s future prospects has been at the center of many past initiatives, with failed results. Tragically however, Pakistan has yet to turn the corner for the better.

Celebratory messages of the past week over yet another IMF loan program in the midst of mounting material and human losses from the latest monsoon rains have only reinforced an oft repeated reality – that the country’s ruling class remains disconnected from the powerful realities across the grass roots.