As President Obama struggles to cobble together agreement between Republicans and Democrats and prevent America from going over the so-called ‘fiscal cliff’ on January 1, Pakistan’s own fiscal cliff approaches. Hardcore economics is rarely the stuff of headlines, but our own economic crisis is coming to a peak. Last Thursday, in a penetrating analysis of our national finances, the Financial Times said that the current government had ‘failed to restore fiscal discipline, curb corruption or take essential decisions on infrastructure development. A week ago Prime Minister Raja Pervaiz Ashraf claimed that his government would be re-elected on the basis of the ‘golden period’ the nation has basked in since the PPP took office. Anybody who thinks that Pakistan has been in a golden period these last five years is deluded. We float on a lifeboat of remittances, have a thriving black economy, are largely untaxed by design and default and would have toppled over the edge were it not for cotton prices propping up the economy. The PM, having already entertained us with his ‘golden period’ comment, went on to shoot himself in the other foot by saying that Pakistan had ‘food security’ – in direct contradiction of a report issued by the planning division and Unicef in the same week.
In the last four-and-a-half years we have seen four finance ministries, six secretaries of the finance ministry, four governors of the State Bank and six chairmen of the Federal Board of Revenue, all come and go. Hardly a recipe for continuity and stability. Pakistan’s foreign exchange reserves nosedived from $14.8 billion in June 2011 to $8.6 billion by the end of June this year and are projected to fall again to $7.4 billion by June next year – a golden period indeed. The GDP growth is stagnant at 2.9 percent and the budget deficit averages around seven percent of GDP. The country is indebted to the tune of $20 billion to foreign creditors and inwards investment is as flat as a chapaati. Our domestic oil production has decreased by five percent in the last year. We have an installed power-generation capacity in excess of our 18,000MW needs but produce only 14,000MW and we are heavily reliant on imported – and hideously expensive – oil. Pakistan has teetered on the edge for years without toppling, but it does now appear to be approaching a crunch. There are no jobs for the country’s ‘youth bulge’; we have an unsustainable budget deficit and a PM who is so out of touch with day-to-day realities that he thinks we are living in a golden period. What is on the horizon is not an upgrade from the golden to the platinum period but a perfect and possibly fatal storm as our many crises and deficits converge.