Protectionism of the rupee and then its free fall

Bureaucracy tasked with policymaking cannot undertake change of course

ISLAMABAD: The ongoing free fall of the rupee against the dollar tells the real story of Pakistan’s economy and budgeting of the state. People are now interested in knowing the impact that the devaluation rupee will have on the economy and the threat it poses to their jobs, income, purchasing power, industry and the capacity to stay afloat.

A state in trouble would not be trusted with the resources it has had as a result of ‘progress’ it has all along been claiming while straying on course to democratisation and modernisation. The official truth is hard to accept in this country where dangerous ideology, corrupt practices and claims of progress have all along been shoved down the mass thinking channels.

Protection to rupee has been transformed into an ideology that is part of the overall scheme of false protectionism.



It is a depressing routine in Islamabad to hear that the World Trade Organization (WTO) prevents protectionism but the rupee would be protected from exchange rate shocks. Exports would be promoted but the unilateral zero-rating of tariff lines in bulk are imperative under commitments made under the China-Pakistan Economic Corridor (CPEC) agenda. Regulatory duty is essential to prevent the decimation of foreign exchange reserves but induction of newer technologies to earn more foreign reserves is not the duty of the state.

Can foreign exchange be earned without building exportable-surplus with the help of ever-modernising production lines? Can default be prevented without earning the ever-growing foreign exchange? Can a foreign exchange policy in the favour of rupee be ensured without offering exporters a better rupee deal?

No officially sponsored seminar in Islamabad on economy and fiscals ever touches upon these issues. Public finance in this country is an area restricted to ensuring funds for budgeting the state at the expense of the economy. Bureaucrats in the 19-22 tiers of grading are hard to impress upon by arguments for change of course in this country.

This is dangerous waywardness. Crying as the rupee sheds value is no use in this country. We have to be attentive to the waywardness residing in the core of public finance policy which is driven by bureaucratic interests. Am I calling for a revolution? Yes, without any political ambitions. This change of course implies not focusing on value the rupee sheds (that is the consequence) but on Pakistan’s trade policy.



Talking about this issue you can easily jumble facts and the corrective propositions, especially when your communication skills are poor and your homework on fiscal-economic channelling does not help. Trade policy initiatives is a complex area; you need to strike a balance between the exportable-surplus you have, the exchange value of your currency, the stage of modernisation of production lines you have, and the budgeting processes you are obliged to deal with.

Our bureaucracy cannot undertake the change of course. It is evident from the budget-making exercise I have been watching in the months of February and March 2018. The business chambers were invited to offer input on budget-making; while they were responding, they did not know that 4,500 tariff lines were being zeroed and this exercise was on under an agreement with China.

What use is the chambers’ input when they did not know what major policy shifts were happening? So, what course should Pakistan take from this disaster? We shall continue this exercise.

The writer has worked with major newspapers and specialises in the analysis of public finance and geo-economics of terrorism

 

Published in The Express Tribune, March 26^th, 2018.

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