Spearhead Opinion – 24.06.2019
By Farrukh Karamat
Senior Research Coordinator, Spearhead Research
The Pakistan Cricket Team, after a dismal start to the World Cup, won their game against South Africa yesterday, in the presence of the COAS at the revered Lord’s Cricket Ground. There are all kinds of computations and scenarios being played out on how the Pakistan team will make it into the Semi-Finals of the World Cup. As always the team and the Nation is hanging on to these hopes with the skin of their teeth. One wonders why we land up in such situations when we have the potential to do much better. Perhaps, the performance of the team is a manifestation of the broader state of affairs of the country, where the economy continues to languish, leadership vacuums persist and the life of the ‘common’ man continues to become harder.
The PTI government after a lapse of almost a year has been unable to chart a course for the future, beyond the overt emphasis on corruption, harassment tactics, and putting a squeeze on the population to extract the maximum revenue under pressure from the International Monetary Fund (IMF). Inflation, interest rates, unemployment and the depreciation of the Rupee continue unabated. The business environment is declining with few ready to put up investment in Pakistan, as a result Foreign Direct Investment (FDI) remains low, remittances are stagnant, exports have failed to increase and the Debt and repayment burden continues to increase. Incidentally, amongst others the Chairman Board of Investment (BOI) also resigned within the first year of the PTI led government.
Amidst all this the main political opponents have been put behind bars, and a commission has been set-up to investigate the loans taken over the past ten odd years by the Government, with not a single debt specialist on the commission. The Government needs to reduce its bloated bureaucratic machinery to curtail the state expenditures. It needs to tackle the issue of off-loading the loss-making State enterprises. It needs to appoint professional officers in key posts and allow them to function without interference, as at the moment the bureaucrats are in a pen down mode and work has come to a virtual standstill.
The expectation was that the PTI leadership had:
- A robust plan in place for reviving the economy,
- An objective and conciliatory stance for dealing with corruption,
- A team of management professionals who would be able to lead and deliver,
- A strong strategy for increasing the revenues and reducing reliance on Debt.
Unfortunately, what emerged was a government that appeared flustered, hapless and clueless about managing the state of affairs of a beleaguered Pakistan. The tall claims and promises of the run up to the elections have just remained that, as the country continues to flounder from one mishap to another, manned by inept and inexperienced managers. Those with high hopes who had joined the Government to make a difference and who perhaps had the ability to deliver have distanced themselves from the shenanigans of the PTI government.
What we are witnessing is:
- A massive slow-down in the growth estimates for the economy to around 2.5 per cent, which is grossly insufficient for the current and growing population and could translate into social unrest in the very near future.
- A high inflation and high interest rate environment, which is making the life of the people more difficult with each passing day.
- Rising debt burden with additional debt being acquired with no end in sight given the high deficits and funding requirements.
- A rapidly depreciating Rupee which has lost close to 54 per cent in value since December 2017.
- No rise in exports despite concessions and the massive Rupee depreciation.
- A severe loss of confidence amongst the investors given the harassment tactics and extraction strategy being adopted by a desperate and under-pressure government to increase revenues.
- Unrealistic budgetary estimates for revenue enhancement, which are likely to place the government under additional pressure.
- Ongoing FATF issues that remain unresolved and could pose a significant threat.
- A lack of leadership ability and an emphasis on frivolous issues, with a spate of ongoing U-turns.
Pakistan needs long-lasting, well-thought out, objective structural reforms across the Board. There have been enough instances in the past when the people of Pakistan have had to bear the brunt of the inefficiency of the Government. A very basic issue that can be considered to highlight this is the Automotive sector. Since 2017 under the garb of devaluation the auto manufacturers have raised the prices of vehicles manufactured in Pakistan in the range of 40-50 per cent. This is in line with the devaluation of the Rupee to date. This in turn implies that these manufactures have failed to implement a robust and planned deletion strategy and have been relying on imports to basically assemble vehicles in Pakistan. This failure has resulted in burdening the consumer with higher prices, low quality products, and a lack of options. Where was the government and why did it not monitor the progress on deletion to benefit the consumers? This inefficiency pervades every facet of life in Pakistan, where the coffers of a few are being filled at the expense of the many. This is the type of ‘corruption’ that the PTI government needs to reform to benefit the ultimate consumer and not the exploiters of those consumers.
In an economy where the size of the parallel economy by some estimates is larger than the real economy, the government has adopted scare tactics, which have effectively taken the parallel economy underground. In the face of lower growth, lack of investment, and an abject failure of the Amnesty scheme it was essential to develop investor friendly policies with tax holidays for the people to come forward and put up local industry as a substitute to expensive imports. Unfortunately, that was not the case and with the disappearance of the parallel economy and a lack of investment the problems in the future would be compounded manifold. It is all very well to threaten the people with raids on their homes for recovery of US Dollars and other assets, but the impact of such announcements is far greater and negative in a society like Pakistan. The government by such measures is exhibiting its helplessness and inability to deliver, instead of infusing confidence amongst the people of Pakistan. It seems that the Government is in the habit of moving from one mess to another of its own creation and the people continue to face a messy mess in the much-touted Naya Pakistan.
The PTI government has a unique opportunity to steer Pakistan in the right direction. The PM is untainted by corruption or wrong doings. Few doubt his noble intentions. The military as an institution is in full support of the government. The environment needs to be changed and this can be done by changing the faces that constitute the public image of the government. From threats and pressures and extractive measures the government needs to move towards building trust so that it has more supporters than enemies. Finally focus on the past will not solve our problems—the focus has to shift to the present and the future. We need to do what is in Pakistan’s interest.