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Monday January 30, 2023

Rescuing Pakistan?

November 30, 2022

With the widely discussed change of command of the Pakistan Army successfully concluded on Tuesday, Pakistan’s biggest challenge – a faltering economy – now waits to be tackled. In the two months since Finance Minister Ishaq Dar took charge after a de-facto overseas exile in the comfort of London’s upper class Mayfair district, sliding economic conditions have only gathered momentum.

And Monday’s drop of Karachi’s stock market index by roughly two per cent following Friday’s rise of Pakistan’s interest rate by another one per cent to 16 per cent spoke volumes over the failure of not just Minister Dar’s peculiar brand of economic management, widely seen as more of a case of mismanagement. It also reinforced the heart of Pakistan’s very troubled economy that Dar appears to have so far failed in accepting. Beyond his promise of overseeing a rapid appreciation of the rupee to at least Rs200 to a US dollar, the opposite has become true.

And with inflation hovering just below 30 per cent, liquid foreign reserves under stress and the overall national budget in disarray notably after widespread losses from this years’ devastating floods, Pakistan faces an unprecedented economic emergency. One pressing issue is urgently in need of an answer – is Dar the man for the job at this very critical time when Pakistan’s very stability is at stake?

Notwithstanding the finance minister’s political rise due to his close family ties with former prime minister Nawaz Sharif, the economy has fallen further in tatters during his watch. If Pakistan’s civil and military leaders join hands to reverse sliding conditions, fixing a torn economy must be their first priority. And while Pakistan’s noisy political conditions led by former prime minister Imran Khan’s call for early elections remain more than just a regular distraction, the country’s destiny can only be lifted through setting the pace towards what will likely be a long drawn and potentially painful journey towards reforming the economy.

Meeting three inter-linked targets to Pakistan's economic challenges must fast become cornerstones of a well-conceived and smartly crafted economic emergency.

First, the ‘political’ management of Pakistan’s economy must be set aside before the collapsing economy can begin to be fixed. For the sake of argument in a purely hypothetical scenario, if Imran Khan were to set aside his opposition to Pakistan’s present-day rulers and join a national government, fixing the economy will still remain a monumental challenge. Across the board along Pakistan’s political divide, every party has been deeply penetrated by self serving vested interests that have repeatedly undermined even the slightest progress towards comprehensive reforms.

Alternatively, a new framework that is detached from partisan politics to lead a reform programme remains the only viable option. Exactly how this will be formed remains a dilemma for Pakistan’s civil-military ruling order. But leaving the challenge unaddressed will only push Pakistan deeper in the proverbial black hole with the future set to pose bigger challenges than the past. And with sliding economic conditions likely to haunt Pakistan in times to come, the country’s very stability is set to be haunted for the foreseeable future.

Second, the business of reforms cannot be successfully undertaken unless across-the-board targeting begins to balance the budget. This must include cutting wastages comprehensively while raising revenue substantially. For the former, Pakistan’s survival depends on the state finally letting go of sources of patronage, including the many corporations in the public sector that have become more than just over-sized white elephants. From the government-owned PIA to the dysfunctional Karachi steel mills, there is no shortage of overbearing and under-performing structures that have eaten into Pakistan’s prosperity. Today, the choice for Pakistan’s leaders is very clear – either to continue with the vast patronage or divert their wastages towards the benefit of Pakistan’s population of 230 million. For the latter, raising revenue substantially requires the state to target elements of the population that are partially or fully immune from paying their dues. Unless the state cracks its whip in targeting tax evaders irrespective of their clout, Pakistan will remain an impoverished nation of the few mighty rich.

Finally, no state can progress without a well-functioning bureaucratic machinery and enforcement of rule of law. Tragically for Pakistan, rule of law has been badly compromised over time. The recent case of the discovery of a luxury ‘Bentley’ vehicle stolen from the UK and eventually found in Karachi provided fresh insight to a long drawn problem. The case not only brought shame to Pakistan’s already tarnished reputation, it also pointed to the many gaps in our ruling structure that led to this sorry outcome.

The prescription to fix Pakistan is obvious. But are the key actors now willing to take decisive and sustainable action?

The writer is an Islamabad-based journalist who writes on political and economic affairs. He can be reached at: farhanbokhari@gmail.com

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