To Solve The Perpetual Economic Crisis, Realign Political Economy And Change Priorities
Pakistan’s economic crisis is not an outcome of mere corruption, incompetence or lack of the minds that can fix it. It is caused by the security-defined economic model that produces nothing. Parliament must be sovereign enough to scrutinize and rationalize resources allocated to every sector of the state, writes Talimand Khan.
Save for intermittent intervals of relief caused by the foreign injected money in return for our geo-strategic services, the country is facing a perpetual economic crisis. A question boggling the mind is, why could nobody fix our economy despite hiring the services of bright technocrats brought straight from the western world of finance to fix an emaciated economy?
Who can forget Moeen Qureishi, brought in as a caretaker prime minister, and the suave Shaukat Aziz, primarily brought in as finance minister to be later imposed as a prime minister by the King’s party? Also, coming under fire is the economic veracity of another technocrat, Hafeez Sheikh, previously serving in the PPP government as finance advisor to then PM Yousuf Raza Gillani.
All of them retreated into oblivion after putting in their two pence of economic wizardry. But the only invariable overruling the economy is an absence of structural change, which is more political than administrative.
Why were the brilliant minds of the world not able to bring any change? Is it because they were unable to pass the twine through the needle’s eye?
Simplistically explained, their mandate was not to bring structural changes but to use their influence in the international financial institutions to get bailout packages. Similar is the case with the present financial technocrat advisers.
The perpetual economic crisis is not an outcome of mere corruption, incompetence or lack of the minds that can fix it. But it is a simple matter of realigning political economy whereby the state needs to change its priorities by devising a balanced plan to redistribute resources to various sectors. Unfortunately, so far, such efforts for change have cost us several elected governments and prime ministers.
The current economic hardships, adversely affecting the majority of the population, are not a result of disasters, war or international recession. Neither can they be laid at the feet of international or regional blockade and economic sanctions (so far). Other regional economies, particular in South Asia, are doing well and their currencies too are more strong and stable than their nuclear armed regional neighbour, Pakistan. The collapse, beyond doubt, is a direct outcome of the very state paradigm that the security establishment has been pursuing for seven decades.
Yet, there is no satisfactory answer to the question why the current government felt the need to break the record by bringing in two mini budgets in its initial five months.
Moreover, the government imposed new taxes of about Rs 3 billion through these mini budgets and substantially slashed allocation for the Public Sector Development Programs (PSDP). So far, the government could not commission mega projects but further slowed down those initiated by the previous government.
Prices of electricity and gas have increased; subsidies by the government for various sectors for public relief are either cut or done away with. In its nine months of governance, the present government has already taken loans of half the amount that was taken by the previous government in five years.
If there are no mega infrastructural development projects, uplift programs or subsides for public relief, why, in contrast, is the government continuously imposing more direct and indirect taxes and increasing the price of essential items? Where has the money gone thus collected through these publicly iniquitous actions?
The free fall of the Rupee not only terrorised the stock market and the business community, it afflicted the entire population. But the misnomer ministers and leaders of the PTI wove a strange logic bordering on absurdity around it.
When the US Dollar touched the figure of 150 against the Rupee, the minster of railways blamed Nawaz and Zardari for its devaluation. While others argued that the previous government had artificially maintained the value of dollar which had a negative impact on the country’s exports.
I wished we could bring down the soaring dollar with ballistic missile or substitute our nuclear stockpile for foreign exchange reserve.
One needs to ask these wizards what was exported which was affected by overvalue of the Rupee, and after such a ruthless devaluation, how much did they estimate to be exported during the next fiscal year? Would its value match the loss the country incurred in retiring the debts? It is estimated that the amount of loans piled up is more than multi billion Rupees which is on account of the devaluation of the Pakistani currency.
The problem is, while keeping in mind the nature of the economy, there is less hope of any amelioration in the existing model. This model has two functions: intake but no output.
The bulk of the resources goes to a sector that neither produces anything nor is subject to any audit. Imagine the economic situation of a country with a population of nearly 207 million with no industrial base, without hi-tech, fine quality or value added export, with less developed human resources and whose economy ranks 130th (in terms of GDP per capita) in the world sustaining the sixth largest army in the world.
Currently, in Pakistan the only functional is the military industry, the civilian industrial sector has either collapsed or is in the process of decline.
This model of economy booms only during the geo-strategic games between the two or more rival powers in the region that opened a temporary window of economic dividends, to be more specific, a cash flow in return of the state’s strategic services.
A substantial portion of the dividends goes to the institution that has domination over such deals and policies and a meagre portion to the budgetary sector with no investment in the industry, particularly heavy industry and human resource development.
When the geo-strategic game is over and there is no immediate new contract for another phase or new game, the economic crisis emerges out of the blue. Why? Because the current economic model needs a constant external flow for consumption. That has to stop! The state has to reevaluate its security paradigm, doctrine and perceptions.
The present economic vertigo is caused by the security defined and dominated economic model that produces nothing. No genius in the world can fix it without redesigning and rationalising resource distribution and investment plan.
For that the parliament must be sovereign enough to have the power to allocate resources to various sectors in a balanced manner, debate and scrutinise resources allocated to every sector of the state, particularly defence because of its size.
This non-conventional security threat in the form of economic collapse is more genuine, dangerous and imminent than the conventional perceived security threat. The shift from geo-strategic to geo-economic is now the only viable option for survival as well as prosperity. And a prerequisite to that is, a shift from security to welfare state.
The author is a political analyst based in Islamabad.