Pakistan’s socioeconomic imperatives

Other than the issues of current account deficit and a poorly structured economy which continue to await major reform there are four fundamentals specific to the Pakistani economy which cry for action without which no economy can sustain its viability. Their existential nature not only drags the economy down but impacts the society and the social make-up distorting its balance. It weakens a nation to the point of becoming easily manipulable by those meaning harm.

Total public debt now accounts for the size of the GDP which in PKR nears 50 trillion (290 billion USD). External debt in dollar terms is around 127 billion USD and counting. We are now among the world’s ten most indebted nations and our external debt exceeds the gross national income. What we earn in revenues is a drop in the ocean and barely serves the mark-up on borrowed principal which continues to pile because the salaries must be paid, the government must keep functioning and the country must still be defended. We do these through additional borrowing. We borrow almost 14 billion PKR (almost 83 million USD) every day to keep the country functioning. This is untenable by any measure. We need to begin to earn more than we spend to ensure our sustenance as a nation, an economy and a society and then to pay back what we have borrowed from others internally and externally. Modern finance can be easily misleading but in crass terms when a country earns less than it spends and does not rectify its expenses or enhance its earnings it is economically and financially bankrupt.

Pakistan’s energy predicament consists of its power and gas sectors. These have accumulated liabilities of 2500 and 1200 billion PKR respectively in circular debt which continues to mount as the nation remains bound in a debilitating policy to pay for capacity charges in foreign currency even when those power units produce no power and none is bought off them. We hold the capacity to produce twice as much electricity than we need and pay for it regardless. This liability isn’t even shown as debt in the total debt stock. How will we ever get out of this stranglehold created by our own wizards who tie us to non-efficient power producers with up-front payments in FE and contractual obligation to provide the most efficient fuel at preferred prices which the country and its economy cannot afford, is anyone’s guess. All efforts to find a solution out of this morass have only returned a blank. On its own it is almost half of the size of country’s GDP which we must still pay out above and beyond the national debt stock. Meanwhile, people and businesses reel under the weight of unaffordable energy prices while the industry finds the input costs beyond rational to match commercially.

Other major leakage which sucks out trillions from the public exchequer without any contribution to the national economy are the Public Sector Enterprises, such as Railways, the Steel Mill, WAPDA and some 80 others. Their cumulative loss amounts to 1100 billion PKR even when these enterprises do not add a penny to the national income. As a comparison the nation-wide annual development plan is also 1100 billion PKR which rarely materialises but the losses to the public sector entities are certain to drain away equal numbers. No government has been able to plug this hole for its political backlash because of the employees that have been placed there by their political patrons over the years. Politics trumps rationality and business sense but none wants to be associated with dumping what is dragging the economy and the nation down.

The biggest draw on national resources is the rapidly increasing population which none has been able to harness. It too entails political capital for a government to face the opposition of the conservative segments of the society who banish such mention for social or religious reasons. We remain stuck at a population growth rate of 2.5 per cent per annum when effective net growth in the economy is negative. Simply stated we are producing a lot more mouths to feed or hands to employ than our collective national capacity permits. This negative acceleration has pushed us to the point of external dependence for our staples and other dietary needs. Malthus, the famous economist, who always warned against the world reaching its dead-end in its production capacity vis-a-vis the population that the planet can afford, has come alive. Even more worriedly we are an exception to the global trend of reducing populations despite having descended to the depths of impoverishment.

When so many are jobless, homeless and striving to fight off hunger for themselves and their families they become a desperate lot. Look back at the last four decades and see how easily has our youth turned itself over to violent terror groups or been radicalised by one or another thought. It correlates directly to the diminishing opportunity in the country in an economy which has only shrunk in size and is embarrassingly inequitable. The much touted promise of the youth bulge has turned into a nightmare. We count 220 million but may well be over 250 million; certain to cross 350 million by 2050. Some 150 million of these are below the age of thirty, without jobs and a future. This is a ticking time-bomb. Something must give. We will either implode or we must restructure, become more equitable, produce more in the economy and produce less mouths to feed. Law and Order is impossible in a populace which increases in such rapidity, when governance is a shamble and administration helpless to catch up to keep a society and a system orderly.

A major fallout of this selective and restricted socioeconomic make-up is the inequity which further fragments and fuels social divisions which then anchor around tribalism, ethnicity, religious sentiment or simply language to coalesce and find a more nefarious purpose in the name of rights. Societies which lose their cohesion and coherence around dismal social and economic indices for lack of equitable opportunity descend rapidly into a ghoulish mould. We have seen the making of it over time in recent examples of mob lynching and depraved social behaviour against women and children. The wheels of justice are badly corroded in another indication of how the society has lost its purpose and moral anchor. The obvious disconnect between the elites and the common man has never been as stark and as assiduously entrenched than it is today. There is a clear need to get the society back to a more hopeful, centralised anchor for its existence. Each segment of the society needs a focused address of what is paramount to their wellbeing. Politics needs to re-evolve itself to deliver what is expected in such times of crises. Neglect is criminal. Purposeful political leadership is both our bane and a crying need.

Published in The Express Tribune, December 24^th, 2021.

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