Conflict within ruling class major cause of economic ‘meltdown’

Pakistan initiated economic stabilisation and structural reform programmes in 1988. In an effort to reduce internal financial imbalances and external deficits, however, there have been challenges with consistency and hierarchy in the implementation of these policies.

The millennia 1988–1996 were marked by persistent attempts to stabilise the economy while making mediocre structural improvements. Because policy initiatives failed to accomplish their goals, the Pakistani economy remained mired in a cycle of poverty, slow growth, low savings, and capital inefficiency, which further impeded growth and the reduction of poverty.

The Covid-19 and the Russian-Ukrainian war, according to one argument, sent the world economy into a spiral and contributed to the phenomena on a worldwide scale. This, however, ignores the fact that Pakistan’s unpredictable performance is, in fact, the defining feature of its economic narrative, which features a few years of promise, followed by a downhill slide.

Macroeconomic data released by various government agencies, including the Finance Division and the Pakistan Bureau of Statistics, is worrisome. According to figures released by the Pakistan Bureau of Statistics, Pakistan’s merchandise trade deficit increased by 28.89% month over month in August, rising to $3.53 billion from $2.73 billion in July (PBS).

Exports increased from 6996 million dollars in July–September 2021 to 7125 million dollars in the same period of 2022, according to trade data.

However, the fact that exports decreased in September 2022 from 2,409 million dollars in the same month the year before to 2,387 million dollars may be a cause for concern.

During the first two months, imports totalled $11 billion, a decrease of $1.1 billion or 9.2%. On the other hand, the post-flooding challenges are enormous, and neither the national nor the global responses are adequate to meet them.

According to the geospatial assessment of the Food and Agriculture Organization (FAO), flooding would result in the loss of a significant amount of livestock and the destruction of approximately 9.461 million acres of agricultural land. The import bill is anticipated to come under pressure once more as the country prepares to acquire more food supplies after floods wrecked havoc on standing crops across the country.

The damage assessment for this year still needs to be finished and it will be substantially larger. The economy of Pakistan cannot sustain these shocks. We have to take this case to the international community in Egypt this year with a sound scientific basis. After the floods, the International Monetary Fund is moving quickly to put together a bailout package for Pakistan.

A few wealthy nations have announced grants. India has offered assistance, but Pakistan has not yet decided whether to accept it or not. Pakistan must also organise its own affairs, draw lessons from the floods of 2010 and 2022, and begin acting quickly to adapt. In Sindh, “appropriate drainage” should be a priority as well.

It’s a huge obstacle. It takes years to recover from these kinds of disasters. We must learn lessons from these catastrophes.

The only responsibility a new administration has is to make all political rivals and allies aware of the impending economic disaster in Pakistan and to pressure them to come to an agreement on the country’s course. Conflict within Pakistan’s ruling class is the cause of this economic calamity.

Governments will come and go, but those who are burdened by unfulfilled promises demand a better future. Furthermore, to significantly increase productivity and pay import costs, governance and policy reforms are required.

The coalition may not have much time to implement all of these productivity and budgetary reforms, but it can start making changes to rebuild the economy for a long-term, sustainable recovery. Before the elections, one hopes it will avoid taking opportunistic action.

Copyright Business Recorder, 2022