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Monday January 30, 2023

Red alert

January 22, 2023

We now have weeks – not months – left to make a decision. Failure to act will be disastrous. To be certain, Pakistan’s economy is manageable. The current account deficit has come down from $1.9 billion in December 2021 to $400 million in December 2022. Additionally, the international prices of crude oil, palm oil, and wheat have dropped, with crude decreasing from $123 a barrel in March 2022 to $85 a barrel, palm oil decreasing from 7,000 Malaysian ringgit to 4,000 Malaysian ringgit, and wheat decreasing from $522 per metric ton to $386 per metric ton.

Pakistan’s economic potential is huge. According to the World Bank, Pakistan has the potential to reach annual exports of $88.1 billion. Additionally, Pakistan has significant potential in the renewable energy sector, specifically in solar and wind power. Currently, Pakistan generates 530 MW from solar power, but has the potential to generate 2.9 million MW. In wind power, Pakistan currently generates 1,248 MW, with a total estimated gross potential capacity of 346,000 MW.

Pakistan’s economy has significant potential for growth. The country has the potential to increase its wheat production from the current 27 million tons to 80 million tons, cotton production from 10 million bales to 23 million bales, and rice production from 7.4 million tons to 13 million tons.

Red alert: The ground reality is that our economy is on the brink. We have three weeks of import cover. We have two weeks of petrol, a month of diesel and a month of steel. We are short on x-ray films and life-saving drugs. There are $5 billion worth of pending LCs. Question: What really went wrong? Answer: Politics has always trumped economics. Political considerations have always been more important than economic ones. Political factors have always taken precedence over economic ones.

Our economy is now on the brink due to an unsustainable trade deficit, an extremely high budget deficit, high levels of indebtedness, inflation, and a weakening currency. The root cause of these issues is that politics has always overridden economic considerations, leading to decisions that prioritize political goals over long-term economic stability.

Egypt is a prime example of a country where politics has consistently overridden economic considerations, resulting in disastrous consequences. Other examples include Sri Lanka, Venezuela, North Korea, Zimbabwe, Lebanon, and Argentina, where political considerations have led to economic mismanagement and financial difficulties.

South Korea is a prime example of a country with a stable and a predictable political environment. President Park Chung-hee, who served for 16 years, implemented a number of economic policies that led to rapid industrialisation. PM Lee Kuan Yew served Singapore from 1959 to 1990 and transformed Singapore from a poor, corrupt, post-colonial island nation to a prosperous, developed country. Mahathir Mohamad led Malaysia for 22 years. President Chiang Kai-shek served Taiwan for more than 25 years. Look where Taiwan is today.

Red alert: Our economy is crashing at the speed of sound, 1,236 km/hour. Our political machinery is moving at the speed of a tortoise, 0.3 km/hour. We are doing exactly what Sri Lanka, Venezuela, North Korea, Zimbabwe, Lebanon, and Argentina did before us. In the case of Sri Lanka, Venezuela, North Korea, Zimbabwe, Lebanon, and Argentina there have been four distinct consequences: hyperinflation, collapse of the economy, unemployment and poverty.

Pakistan’s economy is manageable plus we have the resources. There are only two missing elements: political stability and policy predictability.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: farrukh15@hotmail.com

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