Armageddon Games

The stock market is tumbling; the PKR is fast depreciating against the US dollar; and uncertainty abounds in bazaars big and small across the country. Déjà vu isn’t it? When the PTI was dilly-dallying with pressing economic decisions at the start of their term, the party was blamed for its inexperience. Now that an experienced party (the PML-N) – nay an experienced coalition - is at the helm, one would have expected swiftness of action at display. But alas! Political compulsions have once again sapped the life of economic reasoning, as if a brain eating amoeba has taken over Islamabad.

Neither the dilly-dallying actions of PTI in 2018, nor the PML-N’s (& PPP’s) today can be justified. But the difference is that back in 2018 (and early 2019) when the PTI was creating uncertainty, the country wasn’t undergoing a political crisis. Not at least of the proportions being witnessed today. The combination of political and economic crisis this time around warrants swifter actions; the twin crisis will continue to wreak havoc on markets until the likely painful decisions are taken by those in power. Consumers and investors, borrowers, and lenders, and all and sundry should brace for disaster for there seems to be no happy ending to this story.

One can imagine that gravity of the situation by the helplessness exhibited by the PML-N’s cabinet members lately. Everyone close to the power corridors knows how desperately Miftah Ismail wants fuel and power prices to be rationalized; Miftah knows all too well that there is no other option, a view he has earnestly stated publicly one too many times. But the party doesn’t pay heed to his advice.

In a TV show recently, another party veteran, Ahsan Iqbal appeared helpless, when he explicitly said we can’t increase prices and let PTI reap the fruits of it. One has to be really frustrated and desperate to be acknowledging such things on national TV. When the anchor questioned that the party should have thought of this before going ahead of the VONC, Iqbal really had no answer. Instead, he kept on adding weight to political expediency to justify the party’s failure to take the right economic decisions. Yet oddly enough, he maintained that PTI’s decision to weigh political expediency more than economic rationality was outright wrong. Head I win, tails you lose!

So, what then might come about in the weeks ahead? The right answer is that’s difficult to say. The expression that a week is a long time in politics is best suited for times like these. But sources say that 4-5-hour load shedding; dollar rationing; restrictions on marriage halls, market timings, reduced domestic air travel, and motorway usage; and other mostly administrative measures are some of the ideas that are being pitched to party leaders. Perhaps, the most fuel prices may be increased is to the tune of 10-20 percent of the required increase.

But just how politically expedient would be a 4-5 hour load shedding in such scorching heat, and how material would be the impact of administrative restrictions on import demand? Sooner or later, the PML-N would have to rationalize prices. And in the meanwhile, bankers (through treasury auctions) might force the central bank to raise interest rates again – perhaps quite sharply too. Let the Armageddon Games begin!