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Saturday December 04, 2021

Tsunami

October 24, 2021

The PTI versus the opposition. The PTI versus the establishment. The PTI versus the Election Commission of Pakistan. The PTI versus Biden. The PTI versus China. The PTI versus the IMF. The PTI versus the media. Who said, “friends may come and go, but enemies accumulate?”

Asad Umar as the minister of finance for eight months. Dr Hafeez Shaikh as an adviser for 20 months. Dr Hafeez Shaikh as the minister for three months. Hammad Azhar as the minister for one month. Shaukat Tarin as the minister for six months. A country of 220 million without a minister of finance for a while. Shaukat Tarin as an adviser. Can this uncertainty in tenure be conducive to economic policymaking?

Four ministers of finance in 39 months; average tenure 10 months. Eight chairmen of FBR -- average tenure five months. Four chairmen of the Board of Investment -- average tenure 10 months. Seven inspectors-generals of the Punjab Police -- average tenure six months. Political uncertainty has a great impact on real economic decision-making.

Economic uncertainty “implies that the future outlook for the economy is unpredictable.” Uncertainty is the biggest enemy of investment. Uncertainty is the biggest enemy of economic growth. Uncertainty restrains business owners from hiring. Uncertainty restrains business owners from increasing inventory. Uncertainty about who will actually buy their products. Uncertainty restrains individuals from spending on big-ticket items. Uncertainty makes individuals cautious about their consumption patterns. Uncertainty about future work prospects. Uncertainty about individual incomes.

Uncertainty about the value of individual savings. Uncertainty also means wild stock price volatility.

Vladimir Lenin, the great Russian political theorist, said, “Politics is a concentrated expression of economics.” Political uncertainty “leads to an increase in the equity risk premium.” If and when “political uncertainty intensifies, investors require a higher return on their investment to compensate for bearing additional risks.” Firms need ‘stability in cash flows’. Firms halt or postpone investment plans in periods of high political uncertainty.

Uncertainties galore within Pakistan -- and on top of that there’s a global energy crunch. Yes, “the world is gripped by an energy crunch-a fierce squeeze on some of the key markets for natural gas, oil and other fuels that keep the global economy running and the lights and heat on in homes.” Yes, “power shortages are turning out streetlights and shutting down factories in China. The poor in Brazil are choosing between paying for food or electricity. German corn and wheat farmers can’t find fertiliser…..and fears are rising that Europe will have to ration electricity if it’s a cold winter.”

Brent crude has gone from $37 a barrel a year ago to $85 a barrel. Coal from $60 a ton to $250 a ton. In August, Pakistan State Oil (PSO) made a new record by buying a cargo of LNG at $20 per unit, the “highest ever not only in the country but perhaps the second highest summer purchase in the world.”

There’s a thousand-foot tsunami heading our way with a million tons of rock. We must listen to emergency alerts. We must get to high ground. Our trade deficit is projected to be a colossal $40 billion. External debt repayment $14 billion. Internal debt repayment Rs2.7 trillion. We need two things to ride out the storm: political consensus and economic certainty.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh