2019 started in the background of difficulties encountered in the execution of the PTI’s 100-day plan made public before the elections on July 25, 2018. This plan had neither foreseen the enormity of the balance of payments crisis, nor the fiscal crisis of the state. Even a cursory understanding of the economic history of Pakistan shows that these crises await every new government.

There were valiant firefighting efforts in the first five months until the resolve to avoid the IMF broke down. Just before the first budget, the entire economic team was sacked. It was replaced by those schooled in the IMF tradition. A strong dose of prior actions including massive devaluation of the rupee, additional taxation, a high jump in the interest rate and steep cuts in public spending, particularly the social sector, had to be taken. On top of these stringent measures came the agreement with the IMF.

The result was an austerity regime that had no parallel in the 21 IMF programmes in the past, nor perhaps elsewhere in the world. The IMF never had it so good. There is a prime minister willing to bat against political bouncers and googlies. The umpires stand firmly behind him. Will these Herculean efforts make the 22^nd programme with the IMF the last such programme? Perhaps. What evidence or guarantee is there, however, that the patient will survive the success of the operation?

No doubt, the count of initial successes in stabilising the economy is long. The current account is improving; there was in fact a surplus after a long time. Excluding the biggest expense of debt-servicing, the budget is also not in the red. Stocks have cheered up, foreign direct investment is increasing and over a billion dollar of portfolio investment has flowed in. Despite these achievements, the head of the economic team recognises the challenges ahead — inflation and unemployment. He hopes that the stability achieved is laying the sure foundations for growth: “We have now created a platform on which to build and correct some of the deficiencies of our past and transform our economy.”

This is the long and short of the official story of the economy of Pakistan and where it is headed. It is a story that hides the true face of stabilisation. Ordinary women and men in the street see and feel the inhuman face of stabilisation, when they receive utility bills, when they buy tea and edible oil, whenever they buy tomatoes and atta, if they happen to visit a hospital or pay school fees, or, God forbid, they come in contact with police or patwaris. Every time they drink water, they are reminded of why sanitation is clubbed with it. And let’s not forget the smog and pollution. Nor the job market which is dis-employing more than it is employing.

No numbers are needed to see that stabilisation with a human face is a contradiction in terms. Granted that a difficult economic situation leaves no choice but to take hard economic decisions. In all fairness, however, the resulting hardship must be borne by all segments of society in proportion to their abilities. This is an austerity regime that imposes unequal burden on an already unequal society. Public expenditure is being chopped and taxes have been imposed to balance the budget. Have you seen any major cuts in the current spending on the three elite groups — military, bureaucracy and the political class in that order?

The axe has been applied to development budget, which has adversely affected job creation and service provision. Provinces were forced to show surpluses in their budgets so as to meet the fiscal deficit target imposed by the IMF. They have obliged by cutting social sector spending. The miniscule provision for social protection has remained somewhat unaffected because the IMF said so. In 2018-19, poverty reduction expenditures by federal as well as provincial governments declined. The trend is likely to continue in 2019-20.

Taxes show a similar pattern of the unfair distribution of the burden of austerity. Indirect taxes burdening the common man already constitute the mainstay of the taxation system. Under the austerity regime, their role has increased. No direct taxes worth the name have been imposed on the privileged and the expansion of the base is moving at a snail’s pace. Exchange rate policy does not discriminate between the rich and the poor either. A depreciating rupee raises the prices of items of common consumption such as edible oil, tea and medicines directly and of all items indirectly through the rise in fuel prices. The little public transport that is available also becomes costlier.

Like fiscal and exchange rate policies, monetary policy is also contributing to the unjust distribution of the burden of austerity. Higher borrowing cost adds to the cost of doing business that is passed on to the ordinary consumer. The benefit of higher returns on savings is enjoyed mostly by the large savers. Most of the population is too poor to save.

With its autonomy ensured by the IMF, the State Bank is not printing notes for the government. This should de-fuel inflation but it has not. It was as high as 12.7 per cent in November this year compared to as low as 5.7 per cent in November last year. Technically, it should have brought down the non-food, non-energy inflation, described as core. It has stayed about the same in urban areas and actually increased in rural areas. What matters for the urban poor is food inflation, which skyrocketed from 1.7 per cent to 16.6 per cent. Even worse, the Sensitive Price Indicator went through the roof from less than one per cent to over 20 per cent. In this the revenue-raising through utility prices distributes the burden of austerity inequitably.

For the first time in Pakistan, the purpose of high interest rates is to build foreign exchange reserves by attracting the money that flows out as quickly as it flows in, the so-called hot money. It also signals to local investors that interest rates are not coming down anytime soon and that there is money to be made in financials rather than labour-absorbing real investment. In July-October in this year, credit to private sector fell compared to the corresponding period last year.

With falling public as well as private investment, GDP growth is unlikely to surpass population growth, resulting in a declining income per capita. Inequality will increase with the unequal burden sharing in regard to austerity. Increased inequality will reduce the power of whatever little growth takes place to reduce poverty.