After the bailout

As Pakistan battles multiple pitfalls, Prime Minister Shehbaz Sharif’s government hopes to oversee a period of stability following today’s approval of a new IMF loan worth $7 billion. It is a new lifeline that for now promises to avert a default on Pakistan’s foreign debt repayments, in contrast to early last year when the country was in danger of becoming the next to default after Sri Lanka.

Nevertheless, the path leading to today’s landmark event has witnessed a widening gap between the multiple ordeals surrounding Pakistan’s mainstream households versus the ruling structure.

In the buildup to the news from the IMF, the government has gone out of its way to put a positive spin on the economy, predicting a fall in inflation, continued stability of the rupee and evident signs of an economic recovery just around the corner. Tragically, such expectations are no more than proclaiming the proverbial ‘glass half full’ when in reality it remains ‘half empty’ with few signs of heading to the top in the foreseeable future.

As Pakistan embraces the 24th IMF loan in its history coming in tandem with some of the toughest conditions, the writing on the wall is abundantly clear. Prospects for economic growth will remain practically flat while a conclusive end to the impoverishment of Pakistan’s mainstream is nowhere in sight.

Theoretically, Pakistan can adopt a new IMF-led plan driven by elements such as a robust privatization drive, cutting losses in government expenses, and lifting official revenue. Yet, that would not be the first time that Pakistan’s rulers have promised a brand new beginning, though without eventual success. As repeatedly witnessed before, the key to solving Pakistan’s economic riddle lies in tackling a host of difficult challenges, notably political ones, with assurances of success in the near future.

But this month’s failed attempt by the PML-N-led ruling coalition to amend Pakistan’s constitution badly exposed the diverse political interests embedded within the ruling structure. Once again, the two-day events in parliament beginning on September 15 sparked a powerful reminder of the difficult matter of ruling Pakistan.

This latest complex affair has further complicated the controversy triggered by the outcome of elections in February this year. With questions hovering over the mandate of Pakistan’s ruling structure, it was indeed imperative for the prime minister and his team to work towards building a consensus on the constitutional amendment ahead of preparing to legislate in parliament. That oversight eventually became a fatal political blunder.

Coming out of what can best be characterized as a deeply embarrassing outcome, it would be a terrible mistake for the PML-N-led coalition to push again for a constitutional amendment. Whichever way a new legislative initiative heads, considerable reputational damage to the ruling structure has already been done.

Meanwhile, on the economic front, this year’s controversial budget has already cost the government dearly. With a push to tax the already taxed, Pakistan has seen a further drift away from decisive action against the country’s untaxed or under-taxed communities. It is difficult to predict exactly how popular confidence can be inspired to back the government in a long overdue journey to reform the economy.

The biggest obstacle to the revival of confidence remains a failure to trigger growth in a practically stalled economy. For a long-awaited recovery to finally begin, Pakistan needs a robust change of direction in the management of its economy. In addition to widening the tax net to include Pakistan’s untaxed and undertaxed communities, a fresh focus on the sectors to lead a new growth cycle is essential. In recent years, Pakistan’s mainstream population has suffered under the weight of rapidly rising prices of food commodities while the agricultural sector was widely neglected.

In the first few months of the new government’s tenure, much has been said about rebooting investments in infrastructure – notably, fancy new roads. For an economy practically at a standstill, this order of priorities must immediately change. Across Pakistan’s rural heartland, farmers are now preparing to begin planting their winter crops. The plantation season, notably for the wheat crop, follows one of the worst disasters surrounding a crop considered central to Pakistan’s daily food consumption.

The communities of farmers in spring this year were practically left busted when the provincial governments led by Punjab refused to purchase stocks of the new wheat harvest at a price promised earlier. Many farmers were eventually forced to sell their yields at rates of 30 per cent or more below the officially promised price.

Going forward, the government must immediately launch an emergency campaign to support the plantation of new crops, with the twin objective of producing yields to support Pakistan’s national needs while also stepping up to begin addressing the biggest crises that surround the country’s agricultural sector. Coming out of another IMF bailout with today’s news from Washington is not enough on its own to begin stabilizing Pakistan’s beleaguered economy.

The writer is an Islamabad-based journalist who writes on political and economic affairs. He can be reached at: farhanbokhari@gmail.com