Tuesday November 28, 2023

Insecurity and political upheaval weaken economic prospects

October 01, 2023

ISLAMABAD: As Pakistan struggles to revive confidence in its beleaguered economy, Friday’s terrible terrorist attacks in Balochistan and Khyber-Pakhtunkhwa have powerfully revived the challenge confronting the confidence in a wider entity – the future of Pakistan.

A succession of policy makers have sought to highlight emerging prospects in the foreseeable future to presumably lift Pakistan’s economic outlook as never before. But Friday’s carnage in areas along the Afghan border have come as a forceful reminder of sliding security conditions, continuing to remain the most compelling challenge for any attempt to resurrect Pakistan’s future.

Meanwhile, Pakistan’s political disarray that is set to continue for the foreseeable future, will inevitably further fuel a dangerous divide for times to come. In the run up to the elections whose exact timeline is yet to become clear, Pakistan’s internal divisions are set to deepen.

Beyond such compelling challenges, setting the course for an economic recovery remains no less than a herculean task. As a country, Pakistan has chronically battled a series of economic crises driven mainly by a recurring failure to control the budget deficit and the international trade deficit. Together, both of these parameters remaining out of control has spelt disaster for Pakistan, as its outlook has repeatedly slipped over time.

Elements surrounding the character of Pakistan’s national politics are partly to blame for these twin failures. A long overdue clampdown on tax evasion has repeatedly failed to take off, as powerful consumers have used their clout to stay virtually above the law. Repeatedly, measures leading to a comprehensive documentation of the economy have been spelt out as a vital task by one government after another. To date however, little has been achieved beyond just lip service.

The management of Pakistan’s revenue line has also suffered under the weight of a series of public sector companies continuing to run in repeated and gigantic losses. Unless a sense of crisis forces Pakistan’s ruling class to immediately choose to either privatize or let such companies crash without government support, their drain on official revenue will continue to undermine future prospects for the country.

Meanwhile, parts of Pakistan’s industrial and business class have repeatedly clamored for support. But their ability to mark a lift in either badly needed export income or innovation leading to modernization, have been lacking. Some of the world’s best performing economies have transformed with the backing of their industrial sector performing robustly.

There’s no reason for Pakistan to not take that road to success. But this can not be a one way street. There are cases of prosperity driven industrialized countries where the state contributed generously to oversee fast paced industrial growth. But in Pakistan’s case, past support under successive governments has not yielded a quid pro quo in the shape of robust industrial growth.

And last but not the least, Pakistan’s agricultural sector must be placed at the center of a broader economic revival. In recent years, inflation fueled by escalating food prices has rung the alarm bells over the deadly consequences of a neglect of the farm sector.

Together, these factors can transform Pakistan but only after the twin demons of uncontrolled insecurity and a fast paced political drift are settled conclusively.

The write is a senior journalist based in Islamabad.