Capital suggestion
The Panama Papers-related disclosures came out in April 2016. For the past 17 months, all that we did was Panama. And Panama has become an intra-elite conflict. All we talk about is politics and Pakistani politics is exclusionary politics with extractionary institutions. Pakistani politics is all about 1,174 families, the members of which occupy the 1,174 seats in the Senate, the National Assembly and the provincial assemblies.
Dr Mughees Ahmed, in ‘Voting behavior in rural and urban areas of Punjab’ , scrutinised the results of elections held in Faisalabad during 1977, 1985, 1988, 1990, 1993, 1997 and 2002 and discovered that only candidates from five biradaris – Jatt, Rajput, Arain, Baloch, Gujjar and Kharal – had ever won elections.
Census 2017 tells us that there’s more to Pakistan that just the 1,174 families: Pakistan has 30.2 million families. And what matters to those 30.2 million families are the twin deficits.
Trade deficit: Never in Pakistan’s history have we imported goods and services worth $53 billion (that’s the import bill for fiscal year 2016-17). Never in Pakistan’s history have we had a trade deficit of $32.58 billion. How are we going to fill the trade deficit worth $32.58 billion? Fortunately, our expatriate workers send back around $20 billion annually.
Question: How are we going to fill the remaining $12 billion? Answer: Debt, debt and more debt. Never in Pakistan’s history have we had a current account deficit of $12.09 billion (recorded for 2016-17). Question: How are we going to fill the remaining $12 billion? Answer: Debt, debt and more debt.
Imagine: a current account deficit of over four percent of the GDP (the current account deficit is a broader trade measure that encompasses the trade deficit along with other components). This means devaluation – probably massive devaluation. For the 30.2 million Pakistani families that means even more expensive petrol, diesel, electricity, LNG, cooking oil, lentils and tea.
For the 1,174 families, it doesn’t matter much. In monetary terms, devaluation would mean an additional burden of over Rs25,000 for the 30.2 million families. For the 1,174 families, it doesn’t matter much.
Fiscal deficit: This is the difference between our government’s expenditure and the revenue that it generates. Imagine: the government has incurred a fiscal deficit of Rs1.863 trillion (in absolute terms, this is the largest-ever deficit in our history). Red alert: On behalf of each and every Pakistani family, our government has incurred a fiscal deficit of Rs60,000 per family. Question: How are we going to fill the fiscal deficit of Rs1.863 trillion? Answer: Debt, debt and more debt.
Fiscal deficit is the root of all financial evil. Imagine: a fiscal deficit of over six percent of the GDP. And yes, this deficit does not include the Rs400 billion worth of circular debt. Yes, this deficit does not include the Rs250 billion that the government owes as refunds to taxpayers. Yes, this does not include the Rs173 billion taken on as loans by the public sector enterprises (PSEs). Add them all up and the real fiscal deficit stands at over nine percent of the GDP.
The twin deficits – current account and fiscal – add up to over 13 percent of the GDP. What that means is that our economic security is under threat – under threat like never before. And economic security continues to be the most neglected element of our national security.
The writer is a columnist based in Islamabad.
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