Stunning GDP growth smashes false narratives

The dark clouds hanging over Pakistan’s economy are finally lifting, that too in the middle of a global pandemic


M Bilal Lakhani May 30, 2021

This should be a moment of celebration for all of us. The dark clouds hanging over Pakistan’s economy are finally lifting, that too in the middle of a global pandemic which is devastating our eastern neighbour. But instead of toasting to our sunny outlook, we are roasting in confusion. Headlines are screaming that an expectation smashing 3.94% GDP growth number is a shock, an absolute surprise, questioning the integrity of the data itself.

In this piece, I will argue that Pakistan’s stunning GDP growth number is only a surprise because the media, opposition and opinion leaders believed their own narratives versus following the facts. The mainstream media is so married to playing an ‘incompetence porn’ tape of this government on repeat that they prefer arguing the data is fudged versus accepting they were wrong. For example, unlike armchair anchors who argue that this government is exaggerating growth numbers, Arif Habib Limited, one of the largest securities brokerage, investment banking and research firms in Pakistan, expects growth to clock in at 4.57%, even more bullish than the government. Unlike the media, these folks put their money where their mouth is.

So, why is there a divorce between popular narratives and hardcore data? To understand this phenomenon, we must go back to the beginning of this government, when Ishaq Dar and PML-N gave a sick Pakistani economy gasping for breath (read dollars) to Asad Umar in the emergency room. Almost instantly, the media and opposition began criticising the PTI government for being incompetent because they weren’t rushing to the IMF. Later, they argued PML-N left the economy in a great shape and PTI messed it up. But why should this government have rushed to the IMF, if PML-N left us in such a good shape? I guess one shouldn’t ask such hard questions of the media, lest one be accused to trying to update their software with facts.

Yes, the first two years of this government were very hard on Pakistan. But that was because we were paying for the sins of PML-N. Primary among them a current account deficit of $20 billion thanks to Dar’s fetish for keeping the rupee artificially overvalued versus the dollar. An artificially high rupee meant it was cheaper to import things than to produce them in Pakistan or export goods. Hence, our industry hollowed out, exports actually declined during PML-N’s tenure and imports we couldn’t afford thrived, bringing us to the verge of bankruptcy when PTI took over.

PTI took politically unpopular but wise decisions to correct these sins, including the painful devaluation of the currency. The idea was they would rescue the economy first, then stabilise and then put it on the path to growth. Halfway through stabilisation, Covid-19 hit. Displaying unusual foresight, Imran Khan resisted the elite temptation for a mass lockdown which would hurt the poor. Instead, Ehsaas delivered the largest cash transfer programme to the underprivileged in the history of the country. The SBP offered concessionary loans to industry, electricity tariffs were subsidised, and the construction sector was incentivised to fuel job creation.

And viola, LSM began growing by leaps and bounds month after month. Cars and motorcycles were being sold at breakneck speed. Exports began to rebound thanks to the structural correction in the value of the rupee. The construction sector started booming. Corporate profits hit record highs. And surely but suddenly, our GDP number began to reflect that underlying growth. The only problem? That’s not the story our media and opposition has been selling over the last three years. They’ve been selling a story of utter incompetence by this government.

The facts on the ground, as always, are more nuanced than the narratives projected. There are many fair critiques one can make on this government, including on economy related things like inflation. But to not talk honestly about our spectacular resilience and growth story during a pandemic is a disservice not just to PTI but to Pakistan. What’s even more inspiring is that this growth — built on solid foundations versus artificial exchange rates — is sustainable. As a wise woman once said, the party’s only getting started.

Published in The Express Tribune, May 30th, 2021.

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