A guinea pig economy?

LAHORE: There are two extreme views about the economy in Pakistan. Most economists are extremely pessimistic about the ability of this government to handle economic downfall, while the ruling elite is optimistic about the economic turnaround, as COVID-19 subsides.

Both sides avoid realistic analysis. Past policies may have been flawed but this regime still continues with most of those. Its approach to address the foreign reserves issue through hot money was highly faulty that damaged the local currency. Its decision to squeeze imports though correct in theory but flawed in practice as even essential imports were affected causing the economy to shrink. This government has been criticizing the past governments for all economic ills. However it was this government after the nationalisation of private enterprises by Z.A Bhutto that badly hurt the business sentiments by unleashing anticorruption agencies and FIA against legitimate businessmen that were paying decent taxes. Then it failed to prove any case against them. This effectively stopped fresh investment.

Instead of improving the economy through business friendly policies this government believed in launching imaginary high profile projects. The offshore drilling for oil project near Karachi was given extra hype because a large drilling company agreed to lead the process. Finally when the project failed it was revealed that out of $400 million investment only $100 million was invested by Exxon and remaining $300 million by two public controlled oil companies. Why would the foreign investors not invest if major investment comes from Pakistan and in case of discovery the booty was to be shared equally? Other economic issues were kept on the back burner for six months during which the nation was tuned to believe of a very big oil discovery that did not happen. You do not run the economy this way. Each project has its importance but it should not divert attention from other economic issues. We need an economy that is sustainable and generates jobs.

Another hype was created about the massive Saudi and UAE investment in infrastructure. Several memorandums of understanding (MoUs) were signed in this regard. At about the same time these two countries signed MoUs of much higher investments to be made in India.

Two years down or say 18 months later many mega projects by these two countries have been launched in India and we are still waiting for the launch of any valuable foreign venture in Pakistan.

One cannot blame the Imran government for the failure of Saudi Arabia and UAE to invest in Pakistan. He tried his luck but creating an unnecessary hype on this investment was not wise. Meanwhile industrial investment remained elusive in Pakistan. The industries that were planning to expand put their plans on hold after seeing the performance of this government.

Every industry posted lower growth in the last two years. Almost none of the major industries are operating at full capacity. Many are finding it hard to operate on half capacity. This government completely neglected infrastructure development. It is ironic that it took foreign loans worth $27 billion in one shape or the other. Out of these it consumed $20 billion in servicing the past debt. Where did the balance $7 billion go? It was used for boosting foreign reserves or consumed. The rhetoric of this government is that it has saved billions of rupees through austerity measures but in reality the non-development expenditure or simply put the administrative spending has registered a steep increase.

Where that large increased amount has been spent plus the much touted savings of billions? You cannot expect to make a turnaround in the economy through these non-transparent spending.

The government should go for a reality check and find out where it erred so that corrective measures could be taken. We must realise that there is a limit up to which the masses could be pressed.

That limit has passed about a year back. The government would have to move more transparently and take decisions on merit. It would have to shun nepotism that is seen written all over if we see the list of advisers and special advisers. We do not have a single economist in our ranks that is among the top 100 economists of the world. Indian government has three India-based economists that advise Modi.

Two Pakistani origin economists Dr Atif Mian, a US citizen, and Imran Rasul of the United Kingdom were included by Imran Khan among his economic advisers but he removed Atif Mian under the pressure from religious elements, while the other resigned in protest. Now we are banking on second rate imported economists that are doing experiments on Pakistani economy.