The unending cycle of Pakistan’s economic woes has surfaced once again, with the rupee falling well below what anyone in past and present governments would have imagined. Only a stable government can bring some semblance of order in the country’s uncertain economic scene.
Under these circumstances, the million-dollar question is: will elections produce political stability? A five-year period of stability is needed to put the country on the path of economic growth and development.
Irrespective of who forms the government in the centre, economic challenges, trade deficits, current account deficits, the falling value of the rupee (which has dropped by 14 percent alone in the first half of the year), the declining trend of foreign direct investment (FDI), and expensive loans from private Chinese banks, are creating a different political economy in a country that is plagued with a deepening dependence syndrome.
Without even predicting the results of Election 2018, we can tell that the country is headed towards an era of coalition governments. From the centre to the provinces, parties have to build alliances, engage in a series of negotiations and share power, ministries and decision-making processes. This is a skill that our politicians aren’t very good at; their egos are bigger than any interests and directions. A hung parliament will be easy to capitulate and succumb to pressures.
The blunder that the PML-N committed during its five-year tenure was that it accumulated all power in one province and in one division of Lahore. Most federal key portfolios stayed with the kitchen cabinet while an inclusive decision-making process was neither encouraged nor desired by the party’s top brass.
The new government shouldn’t repeat these blunders. Pakistan is a federal state. If we don’t accord decision-making powers to all provinces, a strong federation won’t become a reality. We already have inherent structural inequities in terms of population, the share of NA seats in parliament, and other challenges that we have inherited from the colonial rule of representation in the armed forces and the civil bureaucracy. A federal government shouldn’t serve as a cover to extend administrative and political control of one province against the others.
Diverse and competing political parties are the reality of our political life. Their influences and support bases are spread across various provinces, regions and ethnicities. These are facts that need to be accepted. As a result, working towards a coalition government will be the best way forward. This goal can be achieved by a leadership that has a broad vision.
Everywhere else, elections produce political stability as parties obtain a fresh mandate and everyone is expected to accept the mandate – a verdict that is ‘by the people’. But this isn’t the case in Pakistan. There have been long spells of political instability in the country. This is why our economic woes continue to loom large and undermine any form of sustained development.
The previous government could be given the benefit of the doubt because its last year in power was marred with political and existential crises. After its finance minister was removed, the party couldn’t pay attention to the looming economic crisis, which threatens the economic gains made during the government.
It is clear that the previous government should have explored other options to address trade deficits and prevent the depletion of foreign exchange reserves. Although FDI has risen in the past three years and reached $7 billion, trade deficits cannot be balanced without competitive exports.
Pakistan’s excessive dependence on CPEC-related investment created false hope that the country won’t face a financial crunch. A major challenge for the new government will be to negotiate a new loan from the IMF. There is no other way through which the country can avoid a further decline in the value of the rupee and pay back its debt.
A recent story in the Wall Street Journal, titled ‘China’s Global Building Spree Runs Into Trouble in Pakistan’, that attributed Pakistan’s debt crisis to China’s CPEC-related loans is grossly inaccurate. Debt isn’t caused by the rising trade deficit. It is created by the inherent weaknesses of our economy, which has never been able to pay debts without borrowing new loans. Pakistan borrows to pay the loans. CPEC loans have generated economic activity and are likely to boost growth and development.
The current debt crisis reflects the previous government’s inability to seek loans from the IMF. However, three years after CPEC was launched, secrecy around the nature of investment (or loans) is a key concern for economists and citizens. The new government must address these issues by sharing agreements with parliament.
Unfortunately, our growth has remained subject to changes in the external environment owing to the wrong and lazy choices that we have made. Growth that is generated through internal economics and has solid foundations can guarantee long-term stability. The looming trade wars between our two largest trade and investment partners – China and the US – are likely to have an impact on Pakistan. In order to get IMF loans, Pakistan will need Washington’s support, which won’t come without a tough bargain.
A democratic dispensation cannot operate freely without the interference of over-developed state apparatuses. The new government needs to assert its sole constitutional role of governing the country and formulating security and foreign policies. This will bring about a real change in the country.
Will the election produce a new country with better policy choices that are divorced from past blunders? It is difficult to see this happening any time soon. But if it does, it will at least ensure that a civilian government doesn’t earn a bad name for the country abroad.