AMID fast-rising political temperatures in Islamabad, the hit to Pakistan’s economic outlook, triggered by the drama unleashed by the Panama leaks controversy, ironically could not have presented a more opportune moment for the ruling structure.
The regime in Islamabad, notably the finance establishment led by Finance Minister Ishaq Dar, now has ample room to argue that the opposition parties’ clamour for Prime Minister Nawaz Sharif’s dismissal has indeed forced down the economy’s prospects. Clearly, that’s just a half truth. The economic glass, according to the ruling structure, which looked more than just half full and progressing onwards not too long ago, is now looking half empty and possibly in danger of drying up.
Yet, a quick review of recent trends will highlight an alarmingly powerful reality. The fallout from the Panama leaks investigations has simply ignited the fire and triggered the losses on the stock market — an oft-repeated official barometer of economic trends.
The economic disconnect is all too evident.
However, reports of foreign equity investors beginning to step out of Pakistan began a while ago, roughly coinciding with other disconcerting trends such as the current account deficit soaring to a record high of roughly $12 billion or more in the last financial year.
That was almost four times the current account deficit in the year before — an indication of Pakistan’s worsening economic health. Meanwhile, Pakistan’s exports have remained stagnant during Mr Sharif’s four-year rule — a clear indication of shrunk opportunities for industrial workers. And while Mr Dar often claims success for the conclusion of Pakistan’s last IMF loan programme worth $6.6bn, that too came at a price.
With some reports suggesting up to 12 waivers given by the IMF over a three-year period to continue its relationship with Pakistan, there are indeed compelling questions over exactly what were the concessions given by the Sharif government in return.
Meanwhile, the prime minister’s passion for continuing with his determined push to oversee one infrastructure project after another has raised some very troubling policy questions. In a country where earlier-than-expected monsoon rains quickly drenched significant parts of Karachi and exposed its multiple municipal gaps, is it right to continue spending more on new road networks or metro bus projects? Meanwhile, other major urban centres across Pakistan, splashed by earlier-than-expected rain, presented a similarly dismal picture.
The government’s decision to award a lucrative contract worth just under $400 million to a Chinese company during the week before the submission of the JIT report to the Supreme Court, repeated a sorry trend. The contract which is geared towards a fancy new airport complex in Lahore, highlights a clear economic fault line.
As Prime Minister Sharif battles for survival, there is indeed mounting evidence of an all-too-visible disconnect between Pakistan’s most pressing needs and the choices made by the rulers. To date, the finance minister has failed to demonstrate exactly how some of Pakistan’s most pressing challenges will be solved with the choices made for the economic direction.
In a country where poverty is widespread and basic human needs such as the provision of healthcare and education seriously lag behind demand, Pakistan’s interests will just not be served with the modernisation defined by the ruling structure.
Among the areas most neglected by the Sharif government, the case of the agriculture sector stands out as a glaring example. Obsessed with a focus on urban centres, notably Lahore which is the ruling family’s home turf, little attention has been paid to the needs of the farming community who make up almost 60 per cent of the population. Though in the past year, a new agriculture support package has translated in outcomes like lower fertiliser prices, that must be seen as a sop ahead of the 2018 elections.
And last but not the least, the failure to tackle Pakistan’s woes cannot be outlined without considering two vital elements. First, the failure to curb continuing energy shortages in spite of repeated promises has eventually hit Pakistan’s economy more than any other input with consequences for a range of sectors. Along with demands from exporters such as a badly needed devaluation of the rupee, the woes of power shortages repeatedly figure prominently.
Second, the alarming failure to pull in more individuals in the income tax net must remain among the biggest failures of successive governments including the Sharif set-up. As Pakistan prepares to accept a foreign debt in excess of $55bn related to CPEC, a massive reform of tax collections has become far more imperative than ever before.
Amid repeatedly loud official claims of a comprehensive conspiracy to dismiss Prime Minister Sharif, the bottom line on Pakistan’s economic front is very clear. The past four years may have well seen plenty of claims of impressive success, but without substance. Some of Pakistan’s key economic challenges remain unaddressed.