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January 15, 2020

Our economic disconnect


January 15, 2020

For the field whose harvest earns no wage for a peasant/ Burn every ripening ear of wheat from such a field – Allama Mohammad Iqbal

The challenges surrounding Pakistan’s economic malaise have badly exposed the powerful reality of an all-too-visible disconnect between the country’s ruling class and constituents across the grassroots.

Almost 18 months after Prime Minister Imran Khan’s government took charge and inherited an economy on the verge of default on foreign debt payments, Pakistan is just not out of the woods. In brief, while the country’s ruling coterie claims to have stabilized the economy, the reality suggests just the opposite. In brief, there is an all too powerful disconnect between the top echelons of the ruling order and the grassroots of Pakistan.

This disconnect is in part driven by a failure to appreciate the reality on the ground across Pakistan. With average households saddled with the harsh reality of mounting inflation coupled with an out of control price check mechanism, there is a palpable sense of crisis in daily lives. Meanwhile, low economic growth and a widespread feeling of despair among the community of investors, has nailed down hope for a recovery any time soon.

Within different sectors of the economy, the multiple challenges surrounding Pakistan’s once thriving agricultural incomes only promise to deepen the economic malaise. In a financial year where the cotton crop has failed while other crops such as rice and maize gave lacklustre performance, the government’s visible failure to address this emergency on a war footing amounts to nothing short of a clear criminal neglect. Meanwhile, the decision to raise the support price of wheat by a meagre seven to eight percent in a year when inflation edged up to 12 percent, shows another side of a failure to connect.

Elsewhere, Pakistan’s mainstream businesses and industry have found nothing more than lip service to serve their needs. Given that half of Pakistan’s population either directly or indirectly relies on farm incomes to meet their needs, a drop in consumer spending is obvious. At a time when farm incomes are surrounded with a sense of crisis all around, there is little hope for retailers across Pakistan’s rural areas to see an upturn in sales any time soon. That sale of tractors according to the latest figures has dropped considerably should come as no surprise.

Meanwhile, Pakistan’s international trade balance has indeed shrunk but that’s driven mainly by a considerable drop in value of imports. Going forward, in the midst of an overall weak economic environment saddled with challenges such as an overall lack of qualified human resource, Pakistan cannot expect to witness a bold surge in exports as witnessed by the Asian tigers, with Vietnam being the latest member of this elite club.

In any discussion of the country’s economy, it is important to clearly address two elements unique to the structure of a state; institutions and political mechanisms entrusted with ruling the centre and the provinces. On both counts, Prime Minister Imran Khan’s government faces considerable odds.

On the one hand, the long overdue need to revamp the Federal Board of Revenue (FBR) – the main federal tax collection mechanism appears to be in some disarray. The recent news of well respected Shabbar Zaidi heading on a 15-day sick leave has raised some compelling questions over the future of this key institution. Zaidi, a very experienced and well-respected chartered accountant was brought in as chairman to oversee a far more reformed FBR. His leave of absence has led to widespread speculation over the chairman being pushed out by Pakistan’s well entrenched tax bureaucracy.

On the other hand, the failure of Usman Buzdar to adequately take charge of Punjab has raised compelling questions over the prime minister’s choice of key decision-makers in his 18-month government. Given that the province is also Pakistan’s proverbial bread basket, revamping the agriculture sector in Punjab will not happen with its present administration.

Unless Prime Minister Khan rises to the occasion, recognizes his government’s failures and takes charge of the economy, his own future will be secondary. Far more vital will be the future of Pakistan where desperate folks must ultimately step on to the streets in acts of desperation.

The writer is an Islamabad-basedjournalist who writes on political andeconomic affairs.

Email: [email protected]

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