Daily Economics

Spearhead Analysis-27.12.2019

By Farrukh Karamat
Senior Research Coordinator, Spearhead Research

Riding on a populist wave of a mass anti-corruption drive and hysteria over the incompetence of the previous Government, the Imran Khan led PTI has now been in power for over a year. Little has changed apart from some faces, and even most of those have been re-cycled. Pakistan is a difficult country to govern, let alone set on a correction course, after years of neglect and mis-governance under the different regimes. There are high hopes from the present government, but certain actions and their performance to date has shown a lack of planning and resolve to bring about the revolutionary changes that were promised.

On the Accountability front, almost all the opposition leadership was put behind bars and the cases dragged on without any meaningful progress. After a year most are out on bail, mainly for health reasons and the remaining are striving to get bail. If there has been any recovery from those arrested it has not been highlighted and does not have appeared to have had an impact on the finances of Pakistan, apart from the considerable cost of housing these inmates and spending hefty amounts on their court appearances. Proving a crime is a difficult task and proving a white collar crime can at best be described as a daunting task. On the release of Nawaz Sharif and his departure for London, Imran Khan clearly appeared exasperated and frustrated in a public address where he mimicked Bilalwal Bhutto.

Unnecessary controversies and legal issues have been created and the government has become embroiled in judicial battles, which could have been easily avoided. The much-criticized Circular Debt has raised its ugly head yet again and at Rs.1.69 Trillion is posing a considerable threat. Of course the people of Pakistan will have to pay the price through additional surcharges. The Public Debt continues to rise and with it the burden on the common man. According to recent figures some 900,000 qualified Pakistanis have left the country in search of better prospects abroad. A lot more are trying, which is a worrying sign.

The Government failed to realize that Pakistan has been surviving economically on a parallel economy that was undocumented but was contributing to economic activity and indirect taxes. Instead of gradually easing that integral segment of the economy into the mainstream, an environment of fear and harassment was created. The result was the disappearance of the money from the mainstream and a rapid decline in the economic and investment activity. The lack of confidence has kept that money out of circulation and gradually all sectors including retail are starting to see the negative impact. At the same time the tax revenue shortfall continues and IMF has recently revised the target downwards by Rs.269 Billion. What was a golden opportunity to channelize the funds into productive use through tax concessions has been all but lost. For now the threatening tone continues. There is a lot of ‘hot’ money flowing into the country with the high interest rates, but that will not boost economic activity as it would leave as quickly as it came in with a change in the interest rate environment.

For the common man the promises appear to be falling short. The cost of living has seen an exponential increase in the wake of high interest rates, devaluation and import controls through enhanced regulatory duties. Joblessness is on the rise, the rates for utilities are being revised upwards on an almost weekly basis, food and fuel inflation is eroding budgets, prices of medicines are on the rise and the wages are stagnant to declining. The purchases of durable goods are being postponed as the people strive to maintain their standard of living. With the onset of winter the supply of gas has been reduced while the bills continue to rise. The bribery rates are higher for getting basic everyday work done and there is a slowdown in performing tasks by the Government servants. Garbage heaps are piling up in Lahore as a hapless provincial government tries to tackle the situation before Lahore turns into another Karachi. In a word, the life of the common man has become very difficult.

Yet, Pakistan has been praised by the International Financial institutions for reducing the current account deficit and stabilizing the economy. The need is not to solely appease the international institutions but to make the life of the common man easier and provide hope for the future. The patience of the populace appears to be running out with frequent incidents of mob violence and road rage as a stressed out and frustrated people try to manage their daily lives. The economy needs to be re-started through industrialization and channelization of investments. The intentions appear to be good but there is a gap in terms of planning for delivering. That is where the focus needs to be to give us the promised Naya Pakistan by making the daily economics easier.