Almost all the governments in Pakistan throughout history– be it a democratic or an authoritative regime—have attempted to provide ‘relief’ to the masses in the form of blanket subsidies on energy and commodities. Any relief measure that is being financed by creating government debt is adding woes to future generations at the expense of today’s consumption and is a mistake. It is simply not sustainable.
Actual economic relief would constitute introducing policies that would result in sustainable growth for a good number of years to create jobs and take millions out of poverty. But the ideas that sell in Pakistan, for the sake of popularity and votes, serve in fact quite the opposite purpose. Pushing more people into poverty and taking away jobs.
The concept of relief needs to be debunked by the media and leaders. No relief is possible if the country is running a high fiscal deficit. That would result in higher inflation, currency depreciation, and economic slowdown. That is happening repeatedly. Yet no one is learning. The media has kept on pushing for relief measures applauding any finance man that provides short-term relief. And the politicians keep on doing so to gain votes.
In this century, the first ‘relief’ was provided by Musharaff in his last days by not passing on the impact of higher oil prices to consumers. That resulted in a ballooning fiscal deficit. It was followed by almost four years of double-digit inflation and low growth. Eventually the impact of the oil prices hike was passed on to the consumers, and the pass-on was higher in PKR due to the sharp depreciation. Poverty in fact increased in the aftermath of this relief.
Later, in Dar’s time, when oil prices crashed, the growth was fueled by keeping currency artificially high and low-interest rates. That resulted in a higher current account deficit. This was followed by another round of currency depreciation and inflation. Then later Shaukat Tarin attempted to provide a ‘loot sale’ budget. That resulted in higher growth; yet again, it was not sustainable.
And the last year -2022, was one of the worst years in the country’s history. A combination of political experiments and global economic recession and commodity price spiral resulted in the worse crisis yet. The country is facing the highest inflation since the 1970s. More people have been dragged into poverty. The middle class is shrinking. And this is despite both PTI and Shahbaz governments attempting to provide ‘relief’ to people in 2022.
2023 started on a very difficult note. Dar and PMLN leadership in London are trying to provide relief to people by not letting the currency find its value, and by not passing on the energy prices (and cost) hike to the masses. The stated policy is to provide ‘relief’ to the masses. And this time, the illusion of relief could result in runaway inflation and debt default. The fiscal deficit is growing and no one in the world is ready to finance it without ending this ‘relief’ mantra.
The new year resolution of media and commentators should be to stop supporting this elusive relief narrative and propagate the policies that are conducive for long term sustainability that work on taking people out of poverty. And this must happen before it is too late.
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