Crisis in economy and governance

According to news reports, despite $2 billion worth of financial aid provided by Saudi Arabia to Pakistan in the last two months, the country’s foreign exchange reserves held by the State Bank on January 11 plummeted to $ 7.05 billion — lowest in the last five years. Never in the recent history of Pakistan has its economic predicament appeared to be so serious and despite jumpstart measures to improve the economy there is no immediate possibility for betterment.

The PTI-led government, however, denies that there is any economic crisis in the country. Prime Minister Imran Khan, during his conversation with journalists at the Prime Minister Secretariat on December 29, ruled out any sort of economic crisis and termed it ‘economic challenges’. It is not difficult to define what is meant by a crisis as the term according to Oxford Dictionary denotes “a time of intense difficulty or danger”. A country with 220 million people is undoubtedly facing a grave economic crisis because its foreign exchange reserves are only capable of meeting less than two months of imports; its trade gap is around $25 billion a year and its economic growth rate will shrink to 4% in 2018-19. Pakistan will have to arrange more than $12 billion to repay just interest on loans during the current financial year. The circular debt has reached an alarming Rs1.5 trillion and according to the Economic Survey of Pakistan, the country’s tax-to-GDP ratio is a meagre 11.2%. Even a layman with a limited knowledge of economy will not dispute the existence of a severe economic crisis, particularly with a sharp rise in the prices of essential commodities, including medicines and utilities.

The government cannot escape from the ground realities confronting the country’s economy as it is also having serious repercussions on the mode of governance. Without a vibrant economy and good governance, one cannot expect human and sustainable development to take place. Crisis in the economy and governance can be described as a ‘double jeopardy’ for Pakistan because of three main reasons. First, unlike their predecessors, the PTI government which came to power with a commitment to bring qualitative change in the lives of 220 million people of Pakistan must not deny ground realities pertaining to crisis in the economy, governance and slow pace of development. When the Prime Minister rules out any sort of economic crisis, it means he is oblivious to facts which threaten the very existence of Pakistan. Nations which are not shy of recognising the existence of crisis and possess leadership qualities to manage and successfully deal with such crises can never fail.

In retrospect, almost all the governments of Pakistan failed to understand the dynamics of economic or political crisis. Fifty years ago, when a popular movement got triggered against Ayub Khan, the then president, in both East and West Pakistan, the government ruled out the existence of a political crisis. On the contrary, the government was busy celebrating ‘A decade of development.” Within a couple of months, Ayub Khan’s regime was gone. Second, the double jeopardy of Pakistan in the shape of crisis in the economy and governance is getting serious because despite the claims of PM Khan to fix things in the first 100 days of his government, one can observe further deepening of the economic crisis.

Neither have the overseas Pakistanis made a significant contribution towards bailing out our economy nor has the menace of corruption and nepotism been reduced, if not eradicated. Is it the right way that instead of pursuing a policy of self-reliance by drastically slashing imports and taking firm policy steps to eradicate corruption and ensuring the rule of law, the government is relying on getting loans from Saudi Arabia, the UAE and China to give a temporary cushion to its depleting foreign exchange reserves? The amount being deposited by Saudi Arabia with the State Bank of Pakistan is, however, exhausted because of payment of foreign debt and for meeting the import bill. Piling up of foreign debt by borrowing billions of dollars will put enormous burden on the country’s economy in the days to come.

Third, the nexus between economy and governance is quite obvious in other models of development like those in the UAE, Malaysia and Indonesia where the focus and emphasis of their leadership is on promoting exports, modernising infrastructure and improving the quality of life of the people.

The UAE’s exports are $316 billion and its foreign exchange reserves are $90 billion. Malaysia’s exports are $187 billion and its foreign exchange reserves are $101 billion. Whereas exports of Indonesia are $168 billion and its foreign exchange reserves are $119 billion. These are the countries which were way behind Pakistan in the 1970s in terms of economy, governance and human development.

Unless there is investment in quality education, providing the people better necessities of life like efficient and affordable public transport, housing, clean and safe drinking water, there cannot be a ‘great leap forward’ as far as economic development is concerned. Without utilising human resource and ensuring the rule of law and justice, no nation can accomplish minimum criteria of economic progress, good governance and development.

The UAE, Malaysia and Indonesia, which were underdeveloped countries at the time of their independence from colonial tutelage, are now better off in terms of quality of life of the people because their leadership was above contradictions and focused on dealing with issues which were a cause of poverty, social and economic backwardness.

Even a country like Bangladesh which was described by former US secretary of state Dr Henry Kissinger as an ‘international basket case’ is cited as a miracle because of its success in maintaining an economic growth rate of 7% over the last five years.

Bangladesh’s exports are now $37 billion and its foreign exchange reserves are $33 billion. Despite political issues, Bangladesh, which was termed an ‘international basket case,’ has managed to transform from an impoverished to a relatively stable country.

Instead of concentrating on its original goals of fixing the economy, eradicating corruption, ensuring good governance and human development, the PTI government is accused of unleashing political victimisation of opposition leaders. Cases of nepotism and corruption are also cited by opposition parties against the PTI government, particularly against its high-profile ministers and advisers. If the Prime Minister is getting bogged down in the vicious cycle of political schism with the opposition and his fragile government is unable to perform in the last five months, it means Imran Khan’s vision for a “New Pakistan” is a non-starter.

Without eradicating the culture of corruption, nepotism, greed, opportunism and hypocrisy, Pakistan cannot deal with its deep-rooted economic malaise and corrupt and inefficient governance system. Unfortunately, despite the election rhetoric, the PTI government has not been able to put a dent on the VVIP culture or adhere to meritocracy.

These are the facts which people who are at the helm of affairs must not deny because respect of a nation is only possible when its leadership is credible, clear, consistent, dynamic and honest.

There is no short cut to dealing with Pakistan’s serious economic predicament and crisis in governance. Unless there is positive transformation in the mindset of people in terms of owning the resources of the country, upholding the rule of rule, adhering to proper work ethics namely time management, and rejecting corruption and nepotism, Pakistan would remain vulnerable to serious economic, political and governance crises.

Published in The Express Tribune, January 18^th, 2019.

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