The Economist in its edition of May 13-19th 2023 has pointed out that the 10-year USD-denominated sovereign bond of Pakistan has a 15.1% yield.
It is also the highest in the world amongst those reported. The closest competitors are Turkey, Brazil, Columbia and Russia with 13.7%, 12.3%, 11.4% and 10.9%, respectively. This is a very alarming situation for Pakistan. This is one side of the picture.
On the other side, the projection by the IMF for the dollar inflows and outflows, released in May 2022, has shown a gap of around $ 77 billion—an amount that the country needs to keep itself financially afloat.
The author has been speaking and writing about this position since 2021; however, the financial managers, the establishment (who are also relevant to economic policy), political parties and independent economists in Pakistan appear to be complacent, to say the least.
The only discussion is about the possibility or otherwise of the revival of the IMF bailout, which will provide only $ 1.5 billion whereas the minimum requirement in the following two years is of over $ 70 billion other than the financing required to meet the current account deficits for 2023 and 2024. We, as usual, are not looking beyond our nose.
The discussion in the following paragraph does not deal with the subject of how this gap will be bridged. This article discusses the reasons why Pakistan has reached this stage. There is a mindset and a history behind this downfall. The author has observed that there is a very strong desire amongst all ‘stakeholders’ to maintain the ‘status quo’ insofar as the country’s economic scene is concerned. In the author’s view, 2023 and 2024 are crucial years for Pakistan.
If the economic scene is not repaired / restructured during this time then there will never be an opportunity for addressing this mega fault line. The chaos and problems will make any future correction practically un-implementable.
Therefore, we will not be far from Sri Lanka, Somalia and some other similar states. Countries do not generally become extinct; however, they fail. In our case this may lead to rethinking of reversals of the events in 1947 and 1971 if the exploitation and expropriation of masses continue.
All the political decisions are ultimately or inherently based on economic considerations as had been the case in 1947. It is high time to rid ourselves of illusions about pan-Islamism, etc. The consequences of any thinking for reversal are suicidal. The sensible people of Pakistan will not let this happen and hopefully matters will not come to such a pass.
The author has seen and studied Pakistan’s economy from various angles. In order to elaborate the arguments for economic revival there is a need to go back to the economic history of Pakistan. There are ten (10) phases of the journey of Pakistan’s economy. These are:
The table reflects the following major factors:
=======================================================================================================Phase Period Finance Ministers Duration and nature of policies=======================================================================================================1 August 15, 1948 to Malik Ghulam Muhammad, Chaudhry Completely US-dominated October 7, 1958 Muhammad Ali, Syed Amjad Ali policies: Duration 10 years;2 October 8, 1958 to Muhammad Shoaib, Abdul Totally US-dominated policies: August 3, 1969 Qadir, N.M. Uqaili Duration of 10 years;3 August 4, 1969 to Admiral Ahsan and Nawab Muzaffar Martial law. Transition February 22, 1971 Ali Qazilbash4 February 23, 1971 Dr Mubasshir Hassan, Rana Hanif, 7-year term.First time a socialist to July 5, 1977 Abdul Hafeez Pirzada agenda. Reversal of capitalist policy absurdly. Only period for socialist thought.5 July 6, 1977 to GhulamIshaq Khan, Mahboobul Revival of US-dominated December 1, 1988 Haque, YasinWatoo, policies: Duration: 10 years6 December 2, 1988 to Ehsanul Haque Paracha Sartaj Aziz, 10 years of PPP/PML period November 12, 1999 Naveed Qamar, Ishaq Dar following earlier policies Democratic regime following US- dominated economic agenda7 November 12, 1999 Shaukat Aziz, Salman Shah 10 years of Gen Musharraf. to March 25, 2008 Completely US-dominated policies.8 March 26, 2008 to Ishaq Dar,Naveed Qamar, Adbul Second 10 years of demo August 18, 2018 Saleem Mandviwala, Ishaq Dar, Miftah cratic era of US dominated Ismail Hafeez Sheikh, Shaukat policies. PPP/PML Tarin, Rana Afzal,9 August 2018 to Asad Umer, HammadAzhar, Hafeez 4 years of PTI. Following the April 19 2022 Sheikh, Shaukat Tarin same US dominated policies10 April 19, 2022 to date Miftah Ismail, Ishaq Dar No policy=======================================================================================================a. It is incorrect to state that adequate time period was not made available to any regime. There were six periods of ten years during the total period of 75 years;
b. Except for a brief period of 1971 to 1977 there was no change in the primary economic policy. It was US-dominated and Pakistan was by and large under IMF programs;
c. The Finance Ministry throughout the period was held by the ‘Outsiders’ in the political circles, but they were the financial movers and shakers of Pakistan. Except for Dr Mubasshir Hassan, Abdul Hafeez Pirzada and Asad Umar there has not been an effective Member of National Assembly who has been the Finance Minister.
The maximum status was the position of Senator elected on non-political considerations;
d. No Bengali has been a Finance Minister of Pakistan during the 1947-1971 period;
e. Siblings and children of almost all the former Finance Ministers are not settled in Pakistan. They all have settled well in the US or UAE. None of the Finance Ministers of Pakistan has ever lectured or taught in any Pakistani educational institution (except Dr Mubasshir Hasan, who was part of the elitist group);
f. Out of the seventy five (75) years, for over 33 years the Finance Ministers were directly answerable to the Chiefs of Army or Chief Executives in the shape of Ayub Khan, Yahya Khan, Zia Ul Haque and Pervez Musharraf; for the first 7 years answerable to a bureaucrat Malik Ghulam Muhammad, a non-elected person;
g. Except for the period between 1971 and 1977, the establishment was always considered as highly relevant to economic policy matters.
The purpose of aforesaid deductions/conclusions is only to identify the priority mechanism whilst deciding the economic policies of the state. In this policy mechanism there are four primary/crucial fault-lines, which override all other considerations. These are:
The enemy across the eastern border: On account of an unsettled dispute with India on Kashmir, security considerations override all economic considerations. Despite an amicable settlement on water distribution managed by the World Bank, the confrontationist attitude on both sides remains alive. For this reason we have been spending over 4 percent of GDP on defence since 1947. This ranks Pakistan’s military spending as a percentage of its total budget as one of the highest in the world. All economic decisions have to be viewed through the prism of security or defence;
a. Federation or Unitary System: The second fault-line is the domination or preponderance of a particular province on the political sphere.
From the period between 1947 and 1971 this was managed by non-democratic arrangements against Bengalis and in the subsequent periods under a Constitutional Provision one province can decide all economic policies on account of their complete majority in the National Assembly. Money Bill that decides all economic policies does not go to the Senate.
(To be continued tomorrow)
Copyright Business Recorder, 2023