Financial advice from a non-economist

Pakistan is in deep trouble because of consistently bad choices with loans

Pakistan is in the midst of one of the worst financial crises. It didn’t happen in a day or weeks as many political leaders and their loyalists like you to believe. This train wreck was coming, and everyone knew about it but did nothing to stop it. We were spending more than what we were earning, and this party had to end one day. We just hoped that the day may be further in the future. In my childhood in some shops, they had a framed picture showing on one side a man who always deals in cash is rich and on the other side a guy who takes loans bankrupted with rats dancing on his empty floor. On that picture, it was always boldly written “lending is prohibited”. Today I feel as a nation we have become that person in the photograph who destroyed himself by taking loans. Rats are dancing on our floor but we still do not understand the gravity of the situation.

My late father was a banker and had access to low interest loans for bank employees. My late mother was very much against taking loans for any purpose. When we had to build our house, she did not agree to take a bank loan and instead sold her plot in Islamabad at a throw-away price. Very soon plots in Islamabad were selling for many times the price we got. However, my parents never regretted their decision and always said “we did not need to take any loan to build our house.” It’s not that they never took loans, but they did only in extreme necessity and not to buy any luxuries. With this financial management my father and mother were able to keep their same lifestyle after the retirement of my father within their own means.

Top economists may tell you that personal financial strategy has no similarity with national economic policy, but I beg to differ. It’s the same! You should only spend what you earn and don’t take any loan unless necessary and not for any luxuries. Why was Pakistan importing luxury items worth billions of US dollars when it didn’t have foreign exchange to pay for it? Why do our government offices (both civilian and military) need expensive cars and mega petrol allowances? Why do ‘nobody’ ministers also need a protocol of few cars to travel with him? Why were we spending when we did not have money?

While leaders and officers are spending government money in keeping big houses and fleets of cars, the ordinary man suffers when the country’s economy goes down. Most of the spending by ordinary citizens is always on food and accommodation and when these prices go up, they don’t have any cushion to absorb. So, where a top leader does not consider the price of tomato or potato important enough for him to pay attention, it’s the question of food in the evening in many houses.

So how to come out from this bottom? First leaders should show an example. Recently when a similar question was put to our finance minister, he said that even with a 10% reduction in government expenses it would not make any dent in this situation. He may be technically correct but as leader they should sacrifice some of their luxuries first and not 10% but 30-40% reduction in expenses is required. Immediate reduction of monthly petrol quotas could be a start. Ensuring government offices use less electricity by turning off air conditioners could be another thing. This was done in PM Gilani’s time and air conditioner use was banned before 12 noon. Prime Minister Junejo mandated small cars for all government officers which not only saved monthly fuel bills but also showed the nation that they are not the only ones sacrificing. Leaders can’t be respected when they preach cost cutting to the nation and themselves are reluctant to leave their lavish lifestyles. We need to stop importing luxury items and make the rich pay their due taxes. Successive governments’ tax amnesties to the rich are shameful and slap on every taxpayer citizen.

We may not be able to get out of these harsh times with the above actions but at least it will show to the nation that we are all in this together to bring Pakistan back on its feet and there is no exempt group hiding behind high walls.

Published in The Express Tribune, June 5^th, 2022.

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