EDITORIAL: The government is lucky to the extent that, once again, international institutions like ILO (International Labour Organisation) are doing crucial research work for it; which quantifies pressing policy concerns.
Now, after ILO released its latest report ‘Asia-Pacific Employment and Social Outlook 2022’, it knows that the regional labour market reeling from the Covid shock is still short of 22 million jobs for 2022. And given the exogenous shocks to growth – political uncertainty, climate disasters, etc. – this number could increase to 26 million next year.
This ought to seriously shake things up in Islamabad. The deteriorating Asia-Pacific backdrop amplifies all the troubles at home, especially the unnecessary ones that cast a long, dark shadow on the economy, specifically the jobs market.
Unemployment and underemployment are emerging as the biggest concerns as the IMF’s structural adjustment contracts fiscal and monetary sectors alike, after all, and this trend will only be made worse by softening growth around us.
Let’s not forget that recent floods put Pakistan front in line among countries suffering from acute climate-related devastation, and there’s no telling when more droughts and rains will shave more percentage points off GDP and hurt jobs without warning.
Then there’s also all the political volatility that has taken over the country over the last 10 months or so, which is also affecting the government machinery and spooking investors and lenders alike. And if all this weren’t enough, TTP (Tehreek-e-Taliban Pakistan) has brought its terrorism back to the headlines, openly announcing attacks up and down the country just when the IMF (International Monetary Fund) programme is suspended and the country is flirting with default all over again.
Given these circumstances, it’s no surprise that the currency is in freefall, financial markets drop more than they rise, and CDS (credit default swaps) on sovereign debt are flashing a default SOS.
Policymakers have their work cut out for them indeed. On the one hand they must implement IMF’s structural adjustment to the letter and cut growth or risk defaulting. Yet on the other, they are also forced to extend subsidies here and there to keep from getting completely wiped out in the next general election.
Now, after ILO’s warning, they should devise plans to withstand unforeseen shocks. But they are hamstrung by inefficiencies that should not exist in the first place. The severity of the situation requires declaring an economic emergency where all stakeholders, especially political parties, will join heads to weed out irritants to growth one by one. Otherwise, we will fall further behind in a region that is already struggling to keep pace with the rest of the world’s post-Covid recovery.
There’s plenty of exogenous drag on growth, just like the ILO report has warned, so the least we can do is get our own house in order and not add to our own problems. The report also explained that the better diversified economies came out stronger from the Covid shutdown.
Yet while Pakistan opened up long before other Asia-Pacific countries and its economy earned precious export windfall, it still wasn’t able to stimulate its labour market adequately. The government must realise that addressing this issue will bring economic as well as political dividends.
It’s natural for people to blame the sitting government for a beleaguered economy, and vote accordingly. Right now there’s growing public anger over the government’s inability to handle high prices and low employment, which partially explains the blind support for the opposition.
If it still doesn’t give this issue the high priority that it deserves, and simply explains away all its troubles with part of IMF’s strict conditions, then it must prepare for a severe backlash at the next election; whenever it is going to be held.
Copyright Business Recorder, 2022
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