One-two punch of high debt and insufficient investment has left many developing economies recovering from pandemic losses staggering none more so than Pakistan
Many omens in the air say it is high time Pakistan turned the page on the incumbent caretaker government, none so sure and urgent as the global economic situation and prospects as described by the UN World Economic Situation and Prospects 2024 report. The buoyancy shown by the global economy in the immediate wake of Covid-19 is no more in evidence. The already meagre global economic growth looks set to further slow from 2.7 per cent in 2023 to 2.4 per cent in 2024. Developing economies are slowing down. The one-two punch of high debt and insufficient investment has left many developing economies recovering from pandemic losses staggering, none more so than Pakistan. Pakistan’s Stand-By Arrangement (SBA) with the IMF may have helped shore up the country’s flagging forex reserves, but it has done just that, allowing Pakistan breathing space to boost revenue mobilization, enhance spending efficiency, and continue to press ahead on structural reforms. These are not challenges amenable to handling by an unelected government with a limited mandate. Pakistan deserves to meet these challenges fair and square with a democratically elected government.
Even if we forget the geopolitical and climate risks lurking in the neighbourhood and the wider world that Pakistan can only negotiate with the full benefit of the nation’s collective wisdom, Pakistan is hungry for investment looking forward. The $100 billion government projects flowing in are spread over several years and are therefore unlikely to provide enough thrust to lift Pakistan’s economy out of the boom and bust cycle. But Pakistan can ill afford to neglect the lurking danger of an environmental catastrophe – not after the 2022 flooding disaster that drowned a third of the country. The 2.0 per cent GDP growth for FY2024 – and 2.4 per cent for 2025 – is conditional on a prudent economic management team firing on all cylinders. Pakistan has kept its policy rate unchanged at a record high of 22 per cent since June 2023 to check inflation, and the UN report sees this policy succeeding although not fast enough: Inflation is still likely to clock in as high as 19.1 per cent for FY2024, decreasing to 10.4 per cent over FY2025. This low growth, high inflation scenario tells the story of continued economic hardship for the people, making the country’s political climate ideal for a political upheaval. Seeds of discontent are visible in various regional trends, but there is no telling when these trends may coalesce into one colossal nationwide phenomenon. An elected government with deep political grounding is the only safe bet to navigate these choppy waters.
Then, too, the UN recommends stronger international collaboration in 2024 and beyond to navigate all the challenges and accelerate progress towards the realization of the Sustainable Development Goals (SDGs). The report makes a case for investment in sustainable development and climate action, particularly through an 'SDG Stimulus' of at least $500 billion per year. Pakistan must have a full-fledged government in the hot seat to develop people-first projects to attract some of that funding. Then there's the matter of an undervalued rupee and government borrowing going through the roof: Between July 1 and December 23, 2023, government borrowing from local banks reached Rs3.12 trillion, a whopping 197 per cent increase. At this rate, it will far outstrip the Rs3.64 trillion borrowed over the whole of last fiscal. The people of Pakistan have a right to know where all that money is going. This kind of government spending would always raise eyebrows at a time when the number of people facing acute food insecurity has increased in the country, but more so under a caretaker government. The takeaway of the UN World Economic Situation and Prospects 2024 for the caretaker government of Pakistan, then, is to put its affairs in order, deliver the general election as scheduled, and walk into the sunset. Only a Pakistan governed by a duly elected political leadership can take care of itself in the fraught world of tomorrow.