Legends of our fall

What do you do with a government that wouldn’t take yes for an answer? Its governing partners gave it carte blanche to effect the much-needed if painful reforms by removing unaffordable fuel subsidies. But for the better part of its tenure, it seems to be frozen in the headlights. Two days back it brought a sweeping ban on the import of numerous items. This might provide some solace to the hemorrhaging forex reserves. But that’s about that. You can stop money’s flights but can’t bring in more foreign exchange. You need a shot in the arm. The kind that the IMF administers.

Consequently, the national media, which has been systemically cutting out its economic and business coverage capacity to make room for more political absurdities and theatrics, is walking all over it. In the government’s defence, this reluctance to jack up the fuel prices comes from a good place. Inflation in the country is already touching unaffordable levels. A hike will most certainly have a cascading effect on the prices of other items. As if that was not enough Imran Khan whose government was ousted slightly over a month ago is threatening to lay siege to the federal capital until his demand for an early election is met. If that exercise succeeds and the country goes for premature elections this could become a huge political liability. The ruling party’s influential members often throw this question around. Are they being asked to sacrifice themselves politically to save the country? If that happens they suspect Imran Khan, the man they so painstakingly removed from power, would be propelled back to the government.

It takes some effort to remind them that they have already decided to take that risk. In removing the former PM they gave him all the material to build his chosen narrative and decry a conspiracy. And here is the problem with sustaining an impossible subsidy. As the rupee sinks and global fuel prices soar the size of the subsidy increases. And that is not all. In the intervening months since the price concession was announced net fuel consumption has increased. So basically you are subsidising your own economic meltdown. In the end, you will be forced to remove this subsidy at the most inconvenient time possible. And then it will really be too late. Relief is good if it does not irreversibly damage the economy. In the current scenario, however, where it could take you to bankruptcy the shock to the system could sweep away all progress made so far.

But the way the media has approached the matter is quite alarming. Instead of focusing on the immediate concerns, it spent Thursday evening spreading sensational rumours about the government’s longevity. Nothing damages the economy more than an environment of uncertainty. But here were some of the leading channels running special transmissions about the premature, if imminent, end of the government. Please remember that in the past a few of the country’s leading anchors have been accused of bringing down the stock market with their negative coverage for their narrow personal gains. Sadly no investigation was launched to study such alleged malpractices. But the way the coverage went on stinks to high heaven. This is the time when the talks with the IMF are going on. Needless to say that such negative speculations can harm their outcome.

But the media’s negative impact does not end there. Right now you are listening to a running commentary to the effect that the government is ineffectual because it cannot take tough decisions like removing the fuel subsidy. Wait until the government is forced to make these decisions. Then the very same anchors and analysts will tell you that inflation has killed the little man and the government has already dispatched the economy to hell in a handbasket.

But why do that? Are these talking heads against the current government? No, they are not. With a few notable exceptions, a majority of them do not have even a nodding acquaintance with the fundamentals of the economy. Sensational news generates higher ratings and they will burn their own houses down to get maximum viewer engagement if they have to. And then there is zero self-accountability.

Today, these pundits will tell you that the present government has failed because it could not effect meaningful change. But given the current monetary volatility and the deadlock in talks with the Fund are partly due to the abrupt change in the SBP leadership our honourable colleagues will never let you recall that many of them kept projecting Dr Reza Baqir as a foreign appointed governor-general and the SBP under him as the East India Company. Similarly today you remember how the PTI government exacerbated the financial crisis by dragging its feet in making critical decisions at the very start. But will the media remind you of its own odious role in the malicious campaign against Dr Atif Mian when his name surfaced as a potential member of Imran Khan’s finance team? These are some of the finest minds in finance and economics that the country has produced and we keep losing their services even when they uproot their lives to come back to the country just because idiots set the agenda.

I do not want to imply that these political governments or the IMF are beyond reproach. I have never been given a satisfactory explanation of why capital expenditure is calculated as a part of the fiscal deficit. Do you realise how extraordinary this practice is? Likewise, the Fund’s current inflexibility in the face of a looming crisis is beyond me. For over a decade I have consistently argued that it must be viewed as an ally. Surely what is going on in Sri Lanka is a wake-up call to the proponents of neoliberal policies. I am sure in the back of the mind of our policymakers there must be this fear that a sudden increase in the fuel prices may generate a backlash as severe as that witnessed on the streets of Sri Lanka. We might struggle in achieving our goals from time to time but surely the Fund cannot possibly want us to fail or go bankrupt. There is a time for tough love. This isn’t it.

In the meantime, Imran Khan is about to march on the federal capital to extract the date for the snap polls. Instead of going by the media hype about the number of participants in his public events, he should consult with some of the leading pollsters to know where his party stands right now. Also, a meeting with good economists to know the inflationary effects of early elections in this volatile situation. Remember if you get your heart’s desire in the shape of an early election and an electoral victory all of this may become your headache again. Let us learn from the cautionary tale of the dog that caught the car.

Published in The Express Tribune, May 21^st, 2022.

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