Tarin sinking PTI’s economic performance and narrative?

Politics is the art of weaving performance and ideology together to tell a story. Contrary to the noise on mainstream media, PTI actually had a decent story to tell on the economy until this year’s budget was presented by Shaukat Tarin. The story goes something like this: 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 good shape?

I guess one shouldn’t ask such hard questions of the media, lest one be accused of 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 with painful economic chemotherapy. The primary metastasising cancer was a current account deficit of $20 billion thanks to Ishaq 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 State Bank of Pakistan offered concessionary loans to industry and the construction sector was incentivised to fuel job creation.

And viola, large scale manufacturing began growing 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. Cement started flying off shelves. Corporate profits hit record highs. And surely but suddenly, our GDP number began to reflect that underlying growth. And then Shaukat Tarin got greedy.

Let me back up a little: when Covid started, the IMF looked the other way as Pakistan spent more freely on social programmes (Ehsaas) and delayed increases in taxes and electricity tariffs. Earlier this year, the IMF and Hafeez Shaikh wanted to get back on the structural reform bandwagon as the economy was recovering but this is where Shaukat Tarin entered as a knight without shining armour. Instead of rolling out hard decisions slowly, he bet on growth and said “we would grow our way out of our problems”. The IMF wasn’t given much lift by Tarin and a budget was presented that was so feel good that it either felt too good to be true or that early elections were on the cards. Essentially, he bet the house (PTI’s reforms and its narrative) on achieving 1-2% of incremental growth, while using shaky assumptions on commodity/oil pricing.

Shaukat Tarin’s stewardship of the economy is something even Twitter economists could forecast resulting in the Pakistani economy dangerously overheating in terms of current account deficit. Today, our monthly import bills are hitting historical highs, a mini-budget with taxes is coming and IMF’s interventions are being stacked together versus paced out.

Moreover, PTI doesn’t really have a narrative to sell anymore because this isn’t a reform agenda; it’s more of the same (current account deficit can’t be bad if PML-N does it and good if PTI does it). To add to problems, there’s no ideological face like Asad Umar or Hammad Azhar leading the charge, who actually have credibility with PTI’s base. Put simply, PTI cannot win the next election with Shaukat Tarin as Finance Minister. This isn’t because of the opposition or the mainstream media; it’s because PTI’s base isn’t going to buy a nothing burger narrative.