EDITORIAL: World Economic Forum (WEF) in its Global Risk Report 2023 has identified five top risks out of 35 through an executive opinion survey for 124 economies surveyed between April and September 2022.
Pakistan’s number one risk in 2023 is digital power concentration and monopolies defined as concentration of critical digital assets, capabilities or knowledge among a small number of individuals, businesses or states that can control access to digital technologies and demand discretionary pricing. Stemming from, but not limited to, the failure of anti-trust regulations, inadequate investment in the innovation ecosystem, or state control over key technologies, etc.
Second: the failure of cyber security measures, including loss of privacy, data fraud or theft, cyber espionage. This was cited as ‘number four’ risk in 2022 report and it is relevant to note that the Global Cyber Security Index placed Pakistan 94th overall and 18th out of 38 Asia-Pacific nations trailing Bangladesh, Sri Lanka and India -– a rating premised on recurrent cyber-attacks through the past five years.
Third, rapid and/or sustained inflation; it was also at third position in the 2022 WEF report which noted ‘failure to stabilise price trajectories’. While Finance Minister Ishaq Dar blames the agreement with the IMF signed by the Khan administration for the rise in tariffs and petroleum levy, yet the seventh/eighth review with the IMF was signed in August 2022 with the Pakistan Democratic Movement (PDM) coalition government in place.
In addition, the PDM government’s own contribution to inflation has been downplayed –- a contribution evident in its decision to raise unfunded expenditure and therefore the budget deficit, an inflationary policy, by 110 billion rupee by extending an electricity tariff subsidy to exporters as well as the 1.8 trillion rupee agricultural package.
The rising gap between the interbank-controlled rate and the open market rate as well as the open market rate at which dollars are actually available (black market) accounts for a fall in remittance inflows through official channels and the administrative measures in place to check imports account for the inability or at best inordinate delays in importing raw material, which is having a major negative impact on employment and output.
Fourth risk is the debt crises. It is noteworthy that in the 2022 report Pakistan’s number one risk was identical: debt crises.
In the 2019 report by WEF, Pakistan’s top risk was energy price shock that “has negative repercussions for the broader macroeconomic environment” followed by water crisis, unemployment/underemployment, terrorist attacks. The debt crisis in public finance has worsened this fiscal year with more than 21 billion dollars required to service external debt (including debt equity incurred through issuing Eurobonds/sukuk) and pay the principal as and when due, a crisis that is being exacerbated by the delay in reaching an agreement with the International Monetary Fund on the ninth review.
And fifth risk is state collapse, which is defined as a state with geopolitical significance due to the erosion of institutions and rule of law, internal civil unrest and military coups, or the effects of severe regional or global instability. This is extremely disturbing though not unexpected as the economic team leaders are passing on the buck to the previous administration, continuing policy measures that are no longer tenable in today’s world, leave alone in a fragile Pakistan economy and last but not least burying their head in the sand by refusing to acknowledge the true state of affairs.
Surprisingly, in the 2023 report, extreme weather did not feature as one of the top five risks. In the 2022 report, extreme weather events were cited as risk number two — a prophecy that sadly was experienced the following year in the summer of 2022 that devastated hundreds of thousands of acres of farm land, destroyed infrastructure and impacted on 33 million people.
And the fifth risk in last year’s report based on data collected a year before was human-made environmental damage. Prime Minister Shehbaz Sharif pointed out during a recent press conference that the 2022 floods highlighted the unsafe location of several dwellings which should not have been allowed; and pledged that all rehabilitation efforts would be geared towards ensuring that the country will better withstand the next climate catastrophe; however, Foreign Minister Bilawal Bhutto-Zardari noted that after the 2010 floods Sindh’s rehabilitation efforts were geared towards safeguarding from an environmental catastrophe on the scale of the floods that year; however, the 2022 was much worse than envisaged at the time.
It is important to note that Amir Jahangir, CEO Mishal Pakistan, the Partners Institute for New Economy and Societies Platform of the WEF, has made an insightful statement in this regard. According to him, for example, “The Global Risk Report 2023 identifies that for Pakistan, both the affordability and availability of basic necessities can stoke social and political instability… The impact of insecurity will continue to be felt in Pakistan and may exacerbate instability due to simultaneous food and debt crises, resulting in the emergence of a possible more technocracy-based decision-making leadership framework.”
The government must take cognizance of the risks that have been cited in this report as ignoring them would be to the country’s peril.
Copyright Business Recorder, 2023