Despite the controversies surrounding the Pakistan Tehreek-i-Insaaf's (PTI's) 'victory' in the 2018 elections, this may not turn out to be what this government is likely to be remembered by. If anything, it will be remembered for its inept and disastrous handling of the economy. Even diehard supporters of the PTI have been silenced by the disastrous handling of the economy by the PTI government and its Finance Minister Asad Umar. The basic flaw in the government's approach to economic matters is its inability to climb down off the container from its opposition agitation days and realise the demands of governance in a fragile economic state.
The government's mantra that all our economic ills were inherited from the past two governments of the Pakistan People's Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N) have by now worn thin, eight months almost into the PTI government's tenure. Certainly, it must be conceded that at least the narrow focus of the previous PML-N government on infrastructure (mostly associated with CPEC) produced imbalances and deficits on the external and internal front. The path chosen by the PTI government to tackle that legacy has been shortsighted, contradictory, and resulted in sending the already shaky confidence of the business community into a tailspin. The latter has responded according to capitalist logic and investment is therefore conspicuous by its absence. When domestic business is not forthcoming, how can international investment be reasonably expected?
The government has been caught in the cleft stick of attempting to boost tax collection (often through misguided draconian measures) to control the budget deficit. Its 'austerity' measures have turned out to be little more than cosmetic, surface steps that have not made any appreciable dent in government spending. The likelihood of missing the revenue targets and inability to curb running expenditure means the development budget will see major cuts. That in turn will impact GDP growth.
All this and more can be found in the World Bank's (WB's) latest South Asia Economic Focus report that forecasts a deceleration of growth to 3.4 percent in Financial Year (FY) 2019 and 2.7 percent for FY2020. This is a far more pessimistic outlook than anything the government, IMF or the Asian Development Bank have come up with so far. To put this forecast in perspective, Pakistan will only be ahead of Afghanistan (some feat!) and behind even Nepal in South Asia. The WB explicates in its report the trajectory of Pakistan's critical economic indicators. Domestic demand will contract (this is already in motion), export growth will be gradual. Services, which had been leading growth in recent years, will decline to 4.4 percent in FY19 (cf. 6.4 percent in FY18). The two key sectors of the real economy, agriculture and industry, will also witness significantly lower growth in FY19 and FY20. The WB report is more optimistic about FY21 (4.0 percent growth), based on the dubious propositions of structural reforms' effect and improvement in macroeconomic conditions. This optimism is not explained or substantiated, at least as far as media reports are concerned.
Illango Pattchamuthu, WB Country Director for Pakistan, reminds us of the obvious when stating: "Pakistan's growth must be driven by investment and productivity, which will put an end to the boom and bust cycles that affect the country every few years." But he does not explain where the money for investment will spring from, nor how, in a depressed economic climate, productivity will improve (which implies technological modernisation and even innovation). Our flagship export sector, textiles, has languished for many years and been overtaken even by latecomers to the party such as Bangladesh because of failure to modernise and add value to its products. The main preoccupation of the textile sector in our country, from the very beginning when some parts of it were set up alongside private enterprise by the state and then handed over to blue-eyed boys in the early years after Independence, has been lobbying every government for concessions. Its malaise is not untypical of the rent-seeking, inefficient sections of the industrial sector of the country as a whole. Nor does the worthy WB Country Director enlighten us how Pakistan can, even with investment and productivity, avoid the inherent boom-bust cycle that afflicts capitalism per se and which has been demonstrated in practice over at least 200 years.
The PTI government, unable to stabilise the economy or rein in galloping inflation so far, has taken recourse to adding to its election campaign promises of building five million houses and providing 10 million jobs by announcing some 'package' or the other every other day. This may provide brief positive optics, but all too soon is overtaken by that nagging, persistent question: show me the money. Given the precarious state of the economy and public finances (not to mention the increase in military spending because of the tensions on our eastern border), all this sounds like pie-in-the-sky.
People are groaning under the ever-increasing burden of inflation that has doubled since this government took office. While Finance Minister Asad Umar 'reassures' the public that their howls and screams because of inflation will increase for the foreseeable future, another worthy minister advises people to eat one roti (bread) instead of 2-3 to affect savings for the state. It is becoming increasingly doubtful whether the poor, nay the vast majority, are able to even afford 2-3 rotis in the first place. Marie Antoinette would have been proud of such 'protégés'.
Meanwhile the partisan, politically motivated, heavy-handed National Bureau of Accountability (NAB) drive against the opposition leaders is forcing them, apart from pressure from their own ranks, to join hands against the government. While Asif Zardari has given what may be a premature threat to overthrow the government through a long march, this may owe more to being pilloried in cases such as the fake accounts matter than any serious attempt to mobilise. PML-N has its own problems with the judiciary (despite former Chief Justice of Pakistan Saqib Nisar's denial of any political motive behind the disqualification of Nawaz Sharif) and NAB, and is still mulling the best response. Maulana Fazlur Rehman has been railing against and asking for the overthrow of the PTI government since his electoral defeat in 2018. However, the glue that could bind these disparate and from time to time feuding parties has still to be seen.
The problem for the people is the lack of hope of better times from any of these factions of the ruling elite. If corruption is the original sin, let him who has never indulged cast the first stone. A movement to champion the rights of the people against the state, its overweening institutions, and a corrupt and venal ruling elite is still awaited.
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