Pakistan’s rudderless economy [News Analysis]

Prime Minister Imran Khan’s promise of returning stability to Pakistan’s economy shows few convincing signs where it matters the most – across ordinary households of the country.

Beyond the official claim lie disturbing gaps, with few indications of the government’s ability or willingness to move in swiftly for turning around the malaise.

For Pakistan’s middle- and low-income households, galloping inflation has left many consumers short-changed. The ugliness of the malaise is evident in sectors like escalating food prices, soaring costs of medicines and related products, and a subsequent hike in the cost of daily services. Together, this comprises the most evident downside of Pakistan’s present day economic trends.

While the past and the present may already be out of the government’s control, prospects for the future appear hardly promising. Across the Punjab province, which is home to roughly 60 per cent of Pakistan’s population, the window of opportunity will soon close for the millions of wheat farmers as they struggle to meet mid to late November deadlines for sowing their crops. This is just one vital element to the multifaceted challenges faced by rural communities in a province once known as Pakistan’s essential bread basket.

This year, a popular lament has emerged in the shape of farmers complaining over the paucity of high quality seeds in the market. As wheat prices soared in the past year, many low income farmers sold their seed stocks in the hope of buying fresh supplies ahead of the sowing period. Clearly, they miscalculated on this front.

Meanwhile, the government’s recent announcement of a subsidy for fertilizers is yet to translate into timely lower prices for farmers, who must plant their fields within days. This episode once again highlights the poor calibre of the provincial administration, led by Chief Minister Usman Buzdar, in anticipating future needs and taking timely action.

At the same time, industrialists too lament a variety of challenges ranging from many consequences that sprung out of Covid-19 crisis to the delays in facilitating their needs. Some sectors of Pakistan’s modest sized industrial economy have recovered following an upturn in orders from overseas buyers. But there is little indication of a wave of investors rushing to set up new industries across Pakistan.

Meanwhile, a delay in approval of the next tranche under a U$6 billion loan from the International Monetary Fund (IMF) has begun triggering anxieties across Pakistan’s ruling and business circles.

For the moment, some relief can be drawn from factors such as a relative improvement in Pakistan’s foreign currency reserves, the Rupee regaining some of its ground lost against the US dollar and the difficulty for lenders such as the IMF to tighten the squeeze around borrowers in the midst of Covid-19 pandemic.

But these factors carry few assurances for the medium- to long-term for Pakistan’s economic security as the ruling structure fails to address key gaps. Such shortcomings are led by an apparent failure to begin a long delayed documentation of Pakistan’s economy, even if a recovery in tax collections is unlikely in the midst of a downturn. On the contrary, this years’ allowance for investors to take up stakes in the construction sector without revealing the source of their wealth, may have yet again weakened prospects for curbs on Pakistan’s black economy.

Going forward, space for concerted and timely action would likely shrink for Prime Minister Imran Khan, as the opposition parties under the banner of the Pakistan Democratic Movement (PDM) escalate their clash with the ruling Pakistan Tehreek-e-Insaf (PTI). For the moment, there are few indications of the Khan-led government about to collapse under the weight of an opposition driven backlash. Yet, there is equally no room for complacency.

Going forward, Prime Minister Khan’s promise of overseeing an economic turnaround is far too premature. In the past, a succession of Pakistan’s policymakers have sought to set the pace for a high growth trajectory based on ingredients ranging from a knowledge-based model to a high tech one.

But these ambitions have time and again failed to deliver in their entirety. At best, Pakistan has seen some initiatives to match world class models, but these have been too few to be counted as evidence of a national economic transition.

In contrast, Pakistan’s best hope for the future lies in gearing up a growth model backed by stability and progress across the rural economy. It is here that the country’s future lies both in terms of achieving sustainable growth and ensuring food security.