The way forward

Discussions and arguments on the politics of the day — at all levels and at all times — are in the DNA of our nation. One widely-argued current topic is if the nation has hit the bottom in political uncertainty and economic decline and is now ready to bounce back?

Pakistan’s political and economic situation is influenced by multiple and complex factors, some hidden and some exposed, and it is difficult to make definitive statements about hitting the bottom or bouncing back. The chequered political history of the country is full of surprises, so to speak.

There have, however, emerged some signs that point towards prospects of betterment. It all depends on how the nation leverages this positivity towards betterment or merely dithers around it to sink further down to a point of no return.

Elections in the country have been announced to be held in February 2023. Free and fair elections on the committed date are the stepping stone towards stability of the national economy. The national economy and politics have never been so intertwined and therefore interdependent as now.

The announcement of the election date and the IMF approval of a $3bn bailout programme, including the immediate disbursal of about $1.2bn to help stabilise the economy and the rollover of $3bn loan from Saudi Arabia, all of it has created a perception for a better outlook, which triggered a surge in Pakistan’s stock market rally and with prospects of a significant boost through foreign investment, contributed to a 50 per cent surge in the benchmark KSE-100 Index since late June.

Lately, Pakistan signed seven agreements and three Memoranda of Understanding with Kuwait to attract investment to various sectors, including food security/ agriculture, hydel power, water supplies (safe drinking water and supporting mining activities), establishment of a mining fund to support mineral industry, development of technology zones, mangrove preservation, environment, culture and art, and sustainable development.

Also, around the same time Pakistan signed MoUs with the UAE pertaining to investment cooperation in the sectors of energy, port operations projects, waste water treatment, food security, logistics, minerals, and banking & financial services.

The government of the day is bullish that these MOUs would translate into billions of dollars of investment flowing into Pakistan’s economy.

On the other hand, the Overseas Investors Chamber of Commerce and Industry (OICCI) has released its latest Business Confidence Index (BCI) Survey – Wave 24, unveiling a promising upswing in Pakistan’s business confidence. Spanning over a period from October to November 2023, this survey shows a seven percent overall improvement compared to the previous Wave in March to April 2023.

The report indicates a positive shift in business sentiment with Pakistan’s overall business confidence standing at negative 18 percent, an improvement from the negative 25 percent recorded earlier. The manufacturing sector witnessed the largest increase, rising by 9%, reaching -10% from -19%, followed by the services sector at 18% (compared to -26%). Although the retail and wholesale sector remains the least confident, it has shown improvement of four percentage points compared to the last survey.

The above cited indicators pointing towards betterment are perception based. The stock market is largely speculative, oscillating between good news and bad news. The news of elections in the country and the approval of IMF tranche promising political stability and economic sustainability are indeed good news.

Any reversal in either, in times to come, would be taken as bad news, causing an adverse impact on the stock market.

The realisation of MoUs signed with the Kuwait and the UAE government are also perception based. The MoUs in itself is a letter of interest, while commitment to a foreign investment is a complex subject of business confidence, country and business risks and return on investment. It is imperative that at the time of commitment of investment the said criteria are met.

Beyond these positive indicators there are more complex areas to be addressed, such as state governance, foreign diplomacy, economic reforms, investments, infrastructure development, and social welfare to enhance stability and promote economic revival.

The way forward is pretty much straight forward — the elections in time and the formation of the new government to own the responsibility of economic revival and political harmony. Anything short of it is not an option.

Copyright Business Recorder, 2023