Uncertain days ahead

Published: August 9, 2019
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The writer is a senior economist. He can be contacted at pervez.tahir@tribune.com.pk

The writer is a senior economist. He can be contacted at pervez.tahir@tribune.com.pk

We were still discovering and rediscovering the real intent of the mediation offer Trump pulled out of his hat in the meeting with the Prime Minister. Many thought this was the reward of not begging for economic aid even at a time of dire need. Others hoped that if peace breaks out between the born foes, the resulting economic connectivity would dispense with the need for foreign largesse anyway. After all, growth, we have been authoritatively told, is regional not national. But the Indian offensive to end the special constitutional status accorded to the internationally disputed State of Kashmir has dotted the i’s and crossed the t’s of the melodrama of mediation.

It is back to the economy of distress and disaster. And not just for the destabilising ventures of the Hindu nationalists in the region. More storms are gathering around the globe. As if the ongoing trade war between the United States and China was not enough to spike the world trade order built patiently since the World War II, the Trump administration has now officially declared China as a currency manipulator. The United States has also walked out of the Reagan-Gorbachev agreement of 1987 on Intermediate-Range Nuclear Forces. Russia has threatened to develop these missiles if the United States does so. With the United Kingdom now ruled by her own version of Trump engaged in “Brexitmanship”, a rules-based world economic order may become a thing of the past.

Out of the ICU, thanks to the IMF package agreed after much foot-dragging and dithering, Pakistan’s economy has been in the emergency ward since July — the first month of the fiscal year 2019-20. A strong fiscal dose, more to squeeze out revenue than to treat the expenditure fat; is being administered. The fast changing strategic scenario is likely to seriously disturb the expenditure projections. The resulting additional burden in taxes will be too much to bear in an economy that is growing less than its population. Fiscal deficit’s twin brother, the current account deficit, is dancing to the tune of the free market, with the dollar already going through the roof. There is less cheese and butter from abroad, but not yet any sign of a joyride on exports. The prescribed monetary diet has led to double-digit inflation as well as interest rates, beating the hell out of consumers and producers. Stocks are not exactly beaming with joy either. More important to the IMF and the United States, especially in the developing regional situation, is the timely fulfilment of the FATF requirements.

It is no more the economy, stupid! The state of the play cannot bear a clinical application of the economic medicine by politically agnostic doctors. Political economy has its own way of finding a low-level equilibrium trap if not guided by statesmanship, leading to sustainable political, social and economic consensuses. A National Development Council set up some time ago was found to be an odd add-on to the existing set of institutions. However, if there was a right time for such a forum, it is now. At the time of writing, the first meeting is reported to be held on Thursday. To deliver, it should represent the nation and the state, not merely the government and parts of the state. At the minimum, it should keep us ready to cope with the uncertain days ahead. Ideally, it should be ahead of events in launching a diplomatic drive, adjusting economic policies and planning, and ensuring a politically united nation. While preparing to respond to aggression, it should achieve national objectives by other means.

Published in The Express Tribune, August 9th, 2019.

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