How to prevent a looming economic collapse?

Policymakers, parliamentarians and affluent classes are least bothered about the looming economic disaster in the country. It is the 220 million Pakistani population that is worried about the imminent crisis — a population that is already bearing the brunt of a sharp escalation in the prices of essential items as well as rising utilities’ charges.

Fifty years ago, in October 1968, the Ayub Khan regime faced massive popular anger just over one rupee rise in the per kg rate of sugar. That anger ultimately led to his downfall. Fifty years down the road, the government has raised the prices of several commodities all at a time, yet there are no outcries among the masses, nor are any opposition parties preparing to play a role in representing the ordeal of the masses.

Does it mean that in fifty years, the consciousness about the government policies that hurt common people — as well as the courage to resist them — have diminished? A couple of decades ago, a 5-rupee per litre increase in the price of petrol within a month was inconceivable. However, now it seems that the ruling class is not one bit worried about any resistance from the public. The government’s failure is becoming apparent: governance, rule of law, and accountability are absent; the efforts to manage the economy are rather worsening the situation; the value of the rupee is depreciating; and there is indifference on issues on the part of the rulers.

Pakistan will face irreparable damage in case of an economic collapse. When inflation, unemployment, debt to GDP ratio, hefty trade imbalance, and heavy dependence on foreign loans are accepted as a fact, the outcome is bound to be disastrous. Taxes collected by the Federal Bureau of Revenue are not even sufficient for debt servicing and defence expenditures. Resources for running federal and provincial governments and executing development programmes are arranged by borrowing from domestic and foreign sources. Pakistan’s economic predicament is a singular challenge to the country’s survival. Plausible and visionary short and long-term policies are absent. As a result, the sovereignty of the country is being compromised and foreign policy challenges emanating from India, Afghanistan, China, and the US are not being addressed.

The erosion of values, ethics and integrity over the last fifty years has taken a toll on the state and society. When political culture of a country is rife with opportunism, corruption and indifference, nothing else but stagnation and stalemate are the outcomes. It looks as if it will make no difference to the Pakistani population or those who wield power if the petrol costs Rs200 per litre, wheat Rs145 per kg and sugar Rs175 per kg, and the value of US dollar jumps to 200 Pakistani rupees. On top of that when ministers — and even professionals like the State Bank governor — rule out any economic crisis and insist that the high flying dollar is benefiting overseas Pakistanis, one can only regret their ignorance and indifference. Why can’t they see that it is the middle class that is being wiped out.

The prevailing price hike in the country has broken the record of the last 70 years. According to the Federal Bureau of Statistics, in the last three years, electricity tariff has risen by 57%; petroleum products have become dearer by 49%; and the rate of edible oil has soared 133%, sugar 83%, 20 kg flour bag 52%, chicken 60%, and beef 48%. Likewise, prices of milk, lentils and medicines have risen sharply. The value of the dollar against the rupee has risen from Rs121 to Rs173. And against all this, the gap in income and expenditure for the lower class and the middle class has augmented. The sole source of relief is the volume of annual remittances which has risen by 27% to reach close to $30 billion in the outgoing fiscal year. However, this alone is no solution to bail Pakistan out of the economic mess. There is need to devise long-term policies to enhance exports, curtail imports, control expenditures, eradicate corruption, and enhance the tax base. The bailout packages from foreign countries — only providing temporary relief — are rather aggravating the economic crisis.

The grave economic predicament has put the survival of the country at stake. Will the opposition’s protests and demonstrations against the excruciating price hike make any difference as regards waking up the incumbents to the reality of the country moving towards a complete failure? If those who are supposed to be concerned about the present and the future of Pakistan are unable to change things for the better, who will pull the country out of the disastrous situation? Those who have read history with an open mind cannot disagree to an early warning of a serious threat to the country.

There can be no quick-fix solutions to prevent a looming economic collapse. One can, however, consider two strategies in the context.

One, stringent measures need to be taken to control price hike and artificial shortage of essential items. Federal and provincial governments must establish their writ on markets to control prices. Special courts to monitor prices of all items should be established with powers to award exemplary punishment to those found hoarding and selling items over and above the official rates. Government officials, members of parliament, and other privileged segments of the state that avail free or subsidised travel as well as petrol, gas and electricity must be made to pay for such facilities so that they share the economic burden with common people.

Two, steps must be taken to reduce imports by 50% and enhance exports by 200% within a span of two years. It will help the government pay back the public debt that is virtually galloping like a horse. Medium-term planning needs to be done to enhance tax collection to Rs7 trillion from the existing Rs4.7 trillion by recovering amounts from those who are making big money from various businesses. Unfortunately, the incumbent government has failed to eradicate corruption and nepotism. No nation can progress unless merit is ensured and taxpayers’ money is utilised fairly.

Pakistan’s path to survival requires a vibrant economy and good governance. If those in charge of affairs fail to recognise the gravity of the situation, the situation will keep worsening.

Published in The Express Tribune, October 31^st, 2021.

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