Sunday December 05, 2021

Real issues

October 17, 2021

For the past week, the real issue for nearly one hundred percent of Pakistan’s decision-makers has been the appointment of the DG ISI. What's the proper procedure? Has the summary come? Has the summary gone? The PTI government managed to convert a routine appointment into a circus then a crisis turning into humiliation and a tragedy. What a circus – clowns, jesters and acrobats. For the PTI government, the real issues have always been TV talk shows, Twitter, Facebook, YouTube, WhatsApp, TikTok and Instagram.

Three out of four Pakistanis, or 75 percent, say that their real issue is the high rate of inflation. Seventy percent Pakistanis say their real issue is unemployment. Fifty-three percent Pakistanis say poverty is their most worrying issue (this according to Ipsos, the Paris-based market research firm). For common Pakistanis the real issues are inflation, unemployment and poverty – all economic in nature. For Pakistan’s decision-makers, though, the real issues are all virtual. That’s the real gap.

On the external front, we are stuck badly in a vicious cycle – a “sequence of reciprocal cause and effect in which two or more elements intensify and aggravate each other, leading inexorably to a worsening of the situation.” Our monthly imports now exceed $6 billion while exports are where they were in 2013. That means an unsustainable trade deficit bringing the rupee under pressure – and ending up in a high rate of ‘imported’ inflation. The only good news on the external front is the growth in remittances. Imagine, eight million overseas Pakistanis sending back a good $31 billion so that 220 million Pakistanis can survive through a $40 billion annual trade deficit.

On the internal front, we are stuck badly in another vicious cycle – a high rate of inflation, unemployment and declining real incomes resulting in poverty and crime. To top it all, the international prices of crude oil, coal, LNG and palm oil are all going through the roof. Crude oil has gone from $37 a barrel a year ago to $84 a barrel. Coal from $60 a ton to $250 a ton. LNG from $10 per mmbtu to $50 per mmbtu and palm oil from $600 a ton to $1,000 a ton. Obviously, international prices are not in our government’s control but the rising prices mean rising input costs and the price spiral.

The other serious issue is uncertainties – political uncertainties and economic uncertainties. Uncertainty, it is said, is the biggest enemy of an economy. Uncertainties galore! Confusion galore! Civil-military relationship? Is the IMF going to accept us back into its programme – and at what cost? Is Shaukat Tarin going to be our minister of finance beyond October 16? Is the rupee going to fall further? Is the current account deficit going to swell to over $10 billion? How big of a burden is Afghanistan going to become – refugees, drugs, terrorism?

The two vicious cycles and the whole array of uncertainties raises ‘Pakistan risk’, the risk ‘generally associated with investing in a particular country’. ‘Pakistan risk’ is another serious issue. Pakistan’s ‘debt distress’ is also a serious issue. Pakistan’s $29 billion gross external financing requirement is the real issue.

The government’s focus ought to be sovereign debt restructuring and debt reduction policies, as opposed to TV talk-shows, Twitter, Facebook, YouTube, WhatsApp, TikTok and Instagram. Our decision-makers need to break the two vicious cycles – internal and external. Our decision-makers need to focus on real issues. There’s no way out of the vicious cycles but wholesale reforms.

The writer is a columnist based in Islamabad.

Email: Twitter: @saleemfarrukh