The Shape of Things to Come

Spearhead Analysis – 17.06.2019

The Prime Minister in his midnight power address to the nation announced a ‘high-powered’ commission to probe loans taken over the last 10 years and determine where the money had gone. This came as a surprise because most people thought that the loans taken by the government were fully documented in every respect. Evidently this is not the case hence the need for this special investigation. Besides the shock effect of this announcement the image of the country has taken a battering as eye brows must have been raised world-wide.

The international rating agency Fitch has maintained a B negative rating for Pakistan and has in fact stated that the IMF loan being negotiated would not make a difference even if it was granted. The government announced that it had obtained a 3.4-billion-dollar loan from the ADB but the ADB has stated that this loan is tied to the IMF decision on the loan to Pakistan and has yet to be approved by its board of directors.

There is a discrepancy in the statistics on GDP growth and inflation. Against the forecast of 4% growth and 8.5% inflation given earlier the Finance Ministry seems to have forecast a 2.4% growth rate and a whopping 13.4% inflation. Either way a difficult period looms ahead.

The expectations raised by the Prime Ministers earlier announcement of good news from the oil drilling operations were dashed when nothing materialized. The colossal debt incurred over the last two decades continues to send shivers down the spine of the common man. Even if the new high powered commission manages to discover the truth behind the debt the situation will not change materially.

With a former President under NAB custody for investigation, a three-time former Prime Minister in jail and various politicians either under detention or facing judicial proceedings and now a new commission to probe government loans the country’s image could have taken a battering. The good news is that a PTI functionary has stated that these developments have put out a positive image of the country and the Prime Minister told the nation that with the economy on a sustainable track he could devote his personal attention to the work of the high powered commission and to the ongoing anti-corruption activity in the country. As per the media the recent elections in India have brought in people, over 40% of whom are facing criminal charges—so perhaps that’s how democracy works.

The opposition in Parliament has joined hands to oppose the recently announced budget terming it a budget that is not ‘awaam dost’ (people friendly) and they have joined hands to make sure that it is not passed by Parliament. People wonder what will happen if the budget is not passed by Parliament and if the opposition parties launch a street movement for an “awaam dost” budget. They have termed the budget an IMF imposed budget prepared by an IMF imposed team but have not specified what they think could be an “awaam dost” budget. Nor have they indicated exactly what is wrong with the highly experienced and qualified persons brought in as advisers by the Prime Minister whom they continue to dub as selected rather than elected completely ignoring the implications of such assertions on the country’s image.

The word on the street is that all economic activity is at a stand-still. This is attributed to the threats being hurled during the anti-corruption drive, the reliance on coercion and extraction rather than any confidence inspiring steps and incentives and the fears raised by the new taxes and FBR actions. Media reports that the falling rupee and the threats are leading people to opt out of banks and stash away cash –a development that that criminals must be intently watching.

The internationally recognized indicators that presage an implosion of some kind are a contracting economy, rising inflation, rising unemployment, unmanageable debt, political and security tensions and falling exports. The acknowledged remedy to avert such a catastrophe is to encourage consumer spending, reach out with cash to the poorest segment and to create jobs through infrastructure and development projects. There is perhaps a need to ease up on threats and foster an environment in which economic activity of all kinds resumes; with a focus on foreign, political and security policies for reducing tensions.

(Spearhead Analyses are collaborative efforts and not attributable to an individual)