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March 22, 2020

Pakistan’s economy: Rescuing from the corona fallout


March 22, 2020

ISLAMABAD: Prime minister Imran Khan’s latest promise to deliver a rescue package for Pakistan’s ailing economy must be seen to be believed.

Speaking to a very select group of journalists on Friday, Prime Minister Khan sought to be recognised as the leader of a crisis stricken time as his government joins others worldwide in combating effects of the deadly coronavirus. But his government’s actions since the outbreak of the fast spreading virus and earlier choices have left glaring gaps.

Rescuing Pakistan’s economy at this difficult time goes well beyond just the scope of economic policies. With the latest figures suggesting the number of corona victims across Pakistan being roughly half or more of the total number of cases across South Asia, the challenge by far exceeds any other witnessed in our recent history.

Going forward, a successful outcome to meet the challenge must ultimately be driven by an unprecedented push for national unity. Under Prime Minister Khan’s eighteen month rule, his search for a new beginning in the name of ‘tabdeeli’ or change has clearly backfired.

The government’s much touted economic policies have only brought misery to the poorest of Pakistan’s poor while the attack on corruption has only divided Pakistan more than ever before. Going forward, Khan’s success in leading Pakistan through the moment of crisis will eventually depend on laying the ground for a new economic direction while forging a closer sense of national unity.

On the economic front, the package to be announced on Tuesday (24th March) must go beyond just a numerical exercise. Judging from his 18 month rule, Prime Minister Khan has made earlier promises such as to build five million new homes for under privileged Pakistanis or planting billions of trees in the name of a new tree ‘tsunami’, without even a visible beginning so far.

The work towards meeting any of these targets appears to remain in its infancy while one third of the government’s five year tenure is over. On the face of it, the prime minister appears to be a man with few clues on the fine details of meeting key objectives.

Likewise, individuals such as Reza Baqer, the Prime Minister’s hand-picked central bank governor, appears to have shown little regard for the intensity of the crisis that has engulfed Pakistan’s markets. The outright rejection by the business community last week of the central bank’s decision to cut interest rates by 75 basis points highlighted the gap between the mood among businessmen and the central bank.

Meanwhile, the rapacious profits earned by Pakistan’s banks in their last balance sheets while the country experienced an increasingly sharp belt tightening needs to be intensely scrutinised. If the central bank indeed cuts its interest rates further in the near term as widely sought, the regulator must move urgently to narrow the gap between returns to depositors and interest rates for borrowers, as parts of the remaining economy continue to sink.

At the same time, the lacklustre performance of Pakistan’s agriculture sector which directly or indirectly remains the source of income for roughly half of the country’s population, in large measure is driven by failed policies over time. While the nation’s attention is focused on the coronavirus crisis, little regard appears to be given for now to the locust emergency that has evolved since summer 2019.

The government appears to have woken up late in the day to this crisis as evident from its announcement of a locust emergency earlier this year. Meanwhile, the fallout from the failure of last year’s cotton crop and under performance of other crops appears to have received little attention beyond lip service.

Unless the prime minister and Finance Minister Abdul Hafeez Shaikh recognise the agriculture sector as the heart of Pakistan’s economic wellbeing, the ongoing crisis of food insecurity vividly exhibited with the recent flour and sugar shortages will likely extend further. The moment of opportunity presented with a historical fall in global oil prices must be used strategically with the benefit immediately passed on to revive key sectors of the economy.

The sharp increases in electricity and gas tariffs during the past 18 months has added considerably to the cost of agricultural and industrial production in Pakistan, at a time when the country has suffered the worst kind of twin whammies – the combined effect of stagnation and inflation resulting in stagflation.

The exercise on the economic front however will remain incomplete unless backed by a concerted push to end the divisions across Pakistan. In reaching out to the media for support during his interaction with a select group of journalists on Friday, the prime minister chose to blatantly ignore the vigorous attacks on media groups during his rule.

The variety of blatant economic sanctions imposed on large media groups, notably the Jang Group and Dawn during his 18 month rule, have badly exposed the democratic credentials of Prime Minister Khan and his Pakistan Tehreek-e-Insaf (PTI). Moreover, the recent arrest of Mir Shakilur Rahman, Editor-in Chief of the Jang Group of Newspapers, on a questionable charge dating back 34 years ago, further highlighted the ruling structure’s push to tighten curbs on the press.

Perhaps Prime Minister Khan ought to learn a lesson from Bilawal Bhutto Zardari who has publicly promised to ban all attacks on the prime minister, seeking national unity in a time of crisis. Tragically however, unless the prime minister presents a new incarnation of an ideal national leader, his record shows little to bring him across as a unifying leader.