close
Friday March 29, 2024

News Analysis: Toxic politics and economy

By Farhan Bokhari
April 16, 2023

ISLAMABAD: As Pakistan’s increasingly toxic politics fuel unprecedented uncertainty, the country’s worsening outlook can only lead to one conclusion: fast-growing distress for the mainstream population.

It is an outcome that flows from the government in Islamabad controversially pushing against the Supreme Court, effectively seeking to neutralise every recent verdict of political consequence from the highest judicial forum.

The prospect of losing political power in Punjab, Pakistan’s most populous province, must only trigger sleepless nights for the ruling class.

The recent moves are driven by a clear political agenda, which effectively seeks to delay the next round of federal and provincial elections for as long as possible. Meanwhile, the visible minority status of the National Assembly members, who passed the latest bills in the absence of the opposition, has only undermined the democratic character of the entire exercise. The government’s political agenda ironically stands in very sharp contrast to Pakistan’s crisis-laden economic outlook. Even the promise of three billion dollars or more in combined support from Saudi Arabia and the United Arab Emirates will only promise to keep Pakistan barely afloat during the current fiscal year to June. And then, the need to pay around US$25 billion during the next fiscal year in foreign debt payments has already set the course for Pakistan entering another tough loan programme from the IMF.

Meanwhile, the delay in the IMF’s disbursement of its next tranche of about $1 billion is partly fueled by Islamabad’s controversial choice to grant a new petroleum subsidy -- an apparent populist move in a likely election year. Judging by history, the exercise stands at risk of being abused, with subsidised consumers picking up the fuel and selling it in the black market without hindrance.

At the same time, an unprecedented economic slowdown is set to haunt Pakistan’s future from the very near term onwards. Over the past 18 months, domestic interest rates have raced ahead by 14 percent to the present 21 percent, setting the course for suppressed borrowing by the mainstream. The financing of consumer items, notably automobiles, whose sales once surged ahead, has now come to a near halt, only to further undermine the domestic vehicle industry. And with inflation galloping away at 35 percent while food inflation is at over 45 percent according to the last estimates, the prospect for economic stability is near paralysed. Besides, with growth in Pakistan, according to the IMF’s latest estimate, expected to clock in at half a percent during the present financial year that ends in June, an economic contraction is underway. With Pakistan’s outlook surrounded by the worst tsunami in years, the case for a fresh political mandate has become overwhelmingly compelling. Without reference to one political player or the other, fresh elections must become an imperative step toward arming Pakistan’s next government with a clear enough mandate to make all the hard choices.

The troubling estimates for upcoming foreign debt payments in the next fiscal year alone provide just a brief glimpse of a challenging future. The recurrence of heavy foreign debt payments is set to last for at least three years, if not longer, from July this year onward. As Pakistan’s unending crisis continues, the fallout across the country is heavily visible. Reports from regions across the flood-stricken districts of Sindh, still present very visible evidence of large communities continuing to live in distress.

Though the authorities in Islamabad continue to pat their backs for securing almost 10 billion dollars in external support at a global conference for flood victims in Geneva, the road ahead will be bumpy. Translating global commitments into changes on the ground requires a range of near-perfectly executed policies. This monumental challenge adds to the already widespread incidence of poverty. On the one hand, Pakistan’s turbulent politics continue to raise enough friction to fuel the continuous risk of an eventual default on debt payments. The beginning of the end to Pakistan’s ongoing political turmoil will only come from a halt to the government’s battle against the Supreme Court, followed by a clear path to a free and fair electoral process.

And, on the other hand, the economy will continue to suffer without a clear-cut and obvious surgery that is waiting to happen. Steep cuts in government expenditure wherever possible will not only provide a symbolic message that the state and its top officials are joining a national belt-tightening effort. It is possible that such an initiative could yield real-life savings. And then, forcing Pakistan’s untaxed or undertaxed elite to pay their dues must continue in tandem as a firm basis for a reformist future.

A vital footnote remains: the long overdue challenge of mobilising Pakistan’s civil society to spread across the country through the scores of non-profit organisations and scale up the ongoing humanitarian work. This is a sector that has faced recurring obstacles over the past decade as successive governments have sought to tighten control over an area that they little understood. But faced with extreme distress across Pakistan, the moment is now more than ever to mobilise the resource that matters the most — the people of Pakistan rising to help people in distress.