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| Growth risks may recur |
Be it pictures of makeshift
crematoria in India at the height of the Covid outbreak in June or those of Afghans
who were eager to leave the country after the Taliban came to power and in
August on the tarmac at Kabul airport while exiting US planes Fell to their
deaths, Pakistanis continued their fight to beat the odds. It is a certain
boldness on your part not only to live on but to expect a better fate this
year. In a pre-election year, the economy will certainly be the focus, and that
can only mean some relief, they say.
As expected, the opposition
believes that the year 2022 will not be bleak unless the hybrid regime is put
in its place. They argue that the ruling party lacks the insight, capacity, and
political capital necessary to put the economy in order. The PTI lost all
goodwill it had among major economic drivers. Now they are not even confident enough
to act decisively, commented a top PPP leader secretly.
In fact, the past two years
have been overwhelming for most Pakistani families as they braved double-digit
food inflation and several upward revisions in utility and fuel prices, but
they probably still feel lucky enough to be alive, and while they are still
alive, it Can't hurt to wait for PTI to keep its promises. If somehow the PTI
economics team manages to curb inflation, improve income/job prospects and
ensure steady gas supplies in their homes, they could apologize for their folly
and choose to thank the party in next year's election.
Opposition leader and former
trade minister Khurram Dastgir Khan was puzzled by the lack of public outrage
despite what he called an economic collapse that has trampled the working
masses. He highlighted the underperformance of governments in the raw
materials, energy and fertilizers sectors. He also addressed the issue of
income inequality, which has widened over the past three years.
In this special
report, the Dawn B&F team selects the minds
of the
stakeholders to take a look into the future.
My constituents are
complaining, but they are reluctant to take the streets against the government.
Presumably, the opposition has so far not been able to articulate its views
well enough to instill confidence in sustainable change. Or they consider all
efforts to oust the government to be in vain as long as the deeper
establishment supports the rebuilding. It could also be that they just wait and
see and want to turn the tables in the next election, he said, while he thought
a little out loud during his conversation with Dawn.
With time running out, the
PTI government needs to improve the economy. To do this, it has to stimulate
investment, revitalize the China-Pakistan Economic Corridor (CPEC), revitalize
the small and medium-sized sector, promote exports, suppress imports, expand
the labor market, ensure fair wage structures in the private sector, allow
reasonable discounts and ensure an affordable supply of farm inputs and
stabilize the currency. Easier said than done, right?
The to-do list, more like a wish list, is long and will be difficult to complete even for the best of the
best. For the weak PTI economic team, which has undergone major changes more
than a few times in the past three years, it will be more difficult, all the
more so when the International Monetary Fund (IMF) comes back on board with the
$ 6 billion Extended Fund Furnishings.
The risk-averse private
sector is unlikely to make new investments in an unfriendly environment, with
interest rates rising and tax breaks, amnesties and concessions reduced. In
terms of public investment, the government is reportedly already considering
cutting a quarter (Rs.250 billion) of its public sector development program by
Rs. 900 billion for the current fiscal year to ease the financial crisis that
the IMF has brought allegedly reported.
In the current disruptive
times, China seems to be on the sidelines and has a very limited appetite for
mistakes, even with strategic partners. For the first time in recent history,
the Chinese leadership had publicly voiced its displeasure with the handling of
CPEC affairs in Pakistan. China was uncomfortable with the security precautions
at CPEC project sites and Pakistan's desire to renegotiate sealed agreements.
The appointment of the tech-savvy advisor (Khalid Mansoor) has proven
insufficient to get the CPEC ball rolling again. The chances of a breakthrough
may be slim, but if the PTI team scrutinizes the CPEC detractors in its ranks
and decides to get rid of irritants quickly, Chinese investment could flow
again.
The Covid-induced lockdown
last year hit small and medium-sized enterprises (SMEs) harder than generally
assumed. Relevant indicators suggest that the entire ecosystem of the vast
informal economy has been disrupted. Many labor-intensive small businesses that
closed during the lockdown (March-May 2020) never made it again. This probably
explains why the 3.9 percent growth last fiscal year felt like a recession. The
government is working to attract SMEs by encouraging bank lending, but more
direct intervention may be needed to rebuild small businesses.
Due to the availability of
exportable surpluses, there are limits to the export. There have been some
improvements as the trade advisor Abdul Razzak Dawood took an active part in
the business community. However, a leap is only possible when the manufacturing
and service base grows and productivity increases.
While the PTI government
attempted to keep the import bill in check by increasing tariffs on
non-essential goods to curb market demand, the policy has had limited success
as the government attributed the subsequent increase in the import bill to the
rise in oil prices and higher demand for raw materials and machines.
The government missed an
opportunity to discipline the private sector to improve worker density and wage
structures when it unconditionally spent public money to revive its operations
after the pandemic shock. There is a slim chance that Business Class will
voluntarily prioritize job creation or employee care packages. There are very
few jobs in the public sector as all levels of government and public sector
companies are generally overstaffed. The government is pinning its hopes on the
labor-intensive construction sector for job creation. Despite a generous
stimulus package, the results so far have not been impressive as unemployment
continues to rise. A study by the Pakistan Institute of Development Economic
has forecast an overall unemployment rate of 16 percent and one of 24 percent
for graduates. Those are grim numbers. Apparently, the government is just as
resilient as the Pakistani people. Both continue their respective fights to
beat the odds.
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