Monday May 29, 2023

Narrow escape

July 03, 2022

It’s been a narrow escape-a “situation in which an accident or other unfortunate incident is only just avoided”. It’s been a close call – a “narrow escape from danger or disaster”. It’s been a near miss – an “incident that could have caused damage, injury or death but was narrowly avoided”. It’s been a “situation in which an accident almost happened”. It could have been a serious accident but was just barely avoided. To say the least, it has been a cliffhanger – a “story or event with a strong element of suspense”.

Eighty-three days ago, Mian Muhammad Shehbaz Sharif took oath as the 23rd prime minister of Pakistan. Eighty-three days ago, the State Bank of Pakistan (SBP) had $10.4 billion in liquid foreign exchange reserves just enough to cover six weeks of imports. Eighty-three days ago, the SBP’s predetermined short-term net drains on foreign currency assets stood at a colossal $15 billion. Eighty-three days ago, Pakistan was headed towards a disastrous sovereign default. Yes, it has been a narrow escape. Never in Pakistan’s 75-year turbulent history has Pakistan been a mere eight-three days away from a default. Yes, it has been a close call, closer than ever before. We have never been so close to a default as we were on April 11, the day a new prime minister was sworn in.

Between August 2018 and April 2022, the PTI added Rs24 trillion to our national debt and liabilities that stood at Rs30 trillion when the PTI took over the reins of power. That’s a full 80 per cent of the debt added over 1,331 days. That’s an addition of Rs17 billion a day, every day for 1,331 days. Between August 2018 and April 2022, circular debt in the electricity sector went up from Rs1,100 billion to Rs2,500 billion. Between August 2018 and April 2022, circular debt in the gas sector went up from Rs350 billion to Rs1,400 billion. Between August 2018 and April 2022, circular at Pakistan State Oil (PSO) went up from Rs200 billion to Rs1,000 billion. The PTI left behind a perfect storm.

Trajectory as of April 11: default within 83 days. As of July 3, default narrowly escaped. That in no way means that Pakistan is out of the woods. Pakistanis have paid an extremely heavy price in terms of a huge dent in their purchasing power. The Consumer Price Index has hit a high of 13.8 per cent.

PM Shehbaz Sharif has managed to dodge a disastrous default. His challenge now is to steer the economy out of the crisis. We need to ‘grow’ out of the crisis. The wheel of the economy must be made to spin faster – there’s no other way out. The ‘deemed tax’ on immovable property, for instance, will slow down the speed of the wheel of the economy. Not good. Wrong signalling to the markets.

Pakistan’s economy needs to grow out of the current economic crisis. There’s no other way out. The ever-expanding government footprint, unfortunately, is the ‘key barrier to economic growth’. The government must deregulate to stimulate growth. Remove government regulations. Reduce government restrictions. Reduce government footprint. Allow businesses to operate freely. Deregulate the energy sector, sugar, petroleum, fertiliser, automobile and the electricity sector. Do away with barriers to entry. Remove barriers to competition.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: