Crashed economy

The upcoming departure of Prime Minister Shehbaz Sharif’s government this month marks an opportunity to assess its performance – or lack of it – during a tenure of around fifteen months.

And the singular biggest legacy worth noting must be a practically crashed economy, irrespective of the unending pats on the back by finance minister Ishaq Dar and his backers, within and outside the government.

On Tuesday, Dar announced yet another fuel price hike for Pakistan’s domestic consumers, and heaped the onus on the IMF for pushing Pakistan to accept tough choices. Yet, the finance minister did not spell out the government’s failure to take charge of the economy and lay the basis for a future without reliance on the Washington based lender. Meanwhile, Dar’s oft-repeated so-called ‘Plan B’ to take Pakistan forward without the IMF’s support has just become a matter of jokes.

The government’s departure has been preceded by its failure to conclude a $6.5 billion loan from the IMF. Instead, its replacement at very short notice came as a $3 billion standby loan for just nine months, with a higher interest rate and a shorter duration for repayment than the previous loan.

This journey has followed last year’s abrupt replacement of respected economist Miftah Ismail who to his credit laid the ground for a resumption of the last IMF loan. Since then, Pakistan’s economy has been on a slippery and downward journey.

The last financial year marked an unprecedented contraction. Pakistan’s industrial and agricultural sectors either shrunk or underperformed. In the last days of the Sharif government, the failure to appreciate the compelling reality is abundantly evident all around.

From promising and distributing free laptops to fanciful new development projects, the government’s spending spree has had few limits. As Pakistanis battle the worst inflation ever, there is just no space for spending on items beyond immediate challenges to lift the exceedingly high stress on individual households.

And Pakistan must urgently devote all of its energies to revitalize agriculture as a top priority for addressing the country’s fast growing hunger crisis. Equally vital must be the cause of lifting Pakistan’s exports to meet the upcoming loan repayments of more than $75 billion over the next three years.

Yet, the flaws surrounding the official thinking of ‘spend, spend, spend’ are much too obvious. A past case in point was the blind pursuit of a scheme to dish out bank loans for about 13,000 yellow cabs without collaterals in the early 1990s, when former prime minister Nawaz Sharif ruled Pakistan. Shehbaz, then widely reputed to be the prime minister’s ‘Bobby Kennedy’, the younger brother who was the ‘go-to person’ for running the government, was ‘hands on’ enough to remember that ill-fated journey.

Eventually, the yellow cab owners practically absconded without repaying their full loans. To make matters worse, many of the cabs were sold at dirt cheap prices just over the border to buyers in Afghanistan, leaving them beyond the already marginal reach of Pakistani authorities. Travelers to Afghanistan then spotted scores of Pakistani yellow taxis conveniently driven around in cities like Jalalabad, Kabul or Herat, just to name the few destinations of choice.

Going forward, Pakistan deserves two inter-related actions on an emergency basis.

First, an immediate ban on all developmental activity is vital before undertaking a comprehensive review by developmental experts. There is simply no room for luxury that could lead to exorbitant expenditure on fanciful and politically motivated spendings. In recent days, independent analysts have been shocked to witness announcements such as an over $900 million planned outlay for a motorway from Lahore to Bahawalnagar and another announcement to add infrastructure around the city of Sharaqpur outside Lahore. The political motives around these two ventures are much too obvious, in view of the Sharif family’s partisan interests in the area.

Second, a series of immediate steps are essential to tackle Pakistan’s upcoming foreign debt repayments which are simply overwhelming. There is an immediate need to begin tackling the challenge of increasing exports while finding substitutes for imports. Unless these two goals are vigorously pursued simultaneously, Pakistan faces the growing pitfall of getting deeper into a foreign debt crisis with implications for the country’s independence, security and overall stability.

Tackling these obvious challenges must proceed vigorously in tandem with other fundamental objectives. The state of Pakistan has lived well beyond its means for too long. In the process, successive governments have routinely subsidized a much too large and unprofitable public sector. Companies like the state-owned PIA and the Pakistan Steel Mills along with many others need to be literally dumped, with the state ending a recurrence of filling their financial holes. Meanwhile, a ruthless clampdown on tax evasion is essential to save Pakistan from becoming further indebted.

The architects of Pakistan’s economic crash from the past nine months neither have a clue nor any commitment to fix the exceedingly large and chronic rot.

The writer is an Islamabad-based

journalist who writes on political and economic affairs. He can be reached at: farhanbokhari@gmail.com