The genesis of current account deficit

Had country been reliant on its own resources, it could have avoided sharp deficit

ISLAMABAD:

At the time of partition of India in 1947, it was the considered opinion of Nehru, Gandhi and Azad that Pakistan will eventually re-integrate into India.

Some international powers (America and Great Britain) may have helped us in avoiding this fate because of their own vested interests. They needed a country like Pakistan to counter the communist and socialist agenda of Russia and China as well as to keep Nehru’s socialist tendencies in check.

Much in the same way as South Korea and South Vietnam were being shielded by the US from the encroachment of Communism.

Liaquat Ali Khan’s establishment of preferential relations with the US and later our moves to join Seato and Cento were again steps in the same direction.

This attempt to prevent the nascent state of Pakistan from the fate of being merged into united India again, was the easiest and most convenient option for the senior politicians and the military elite at the helm of affairs during the happening years from 1950 to 1988.

The huge military and financial aid received during this time was thoughtlessly fritted away by these powerful elite in the manner of reckless absolute monarchs.

US/ West European aid and support for Pakistan as an anti-USSR rentier state is perhaps a root cause of all the past and subsequent adverse national decisions.

After the 1962 Indo-China war, Pakistan’s increasing inclination to have even closer relationship with China, gave us another avenue to expand our aid/ loanseeking portfolio.

Had we had to fight for our own survival, without the opium of this international aid, perhaps, today we would not have been a nation always waiting for help, ever eager for loans and unacquainted with industry and craftsmanship. We could have been poor, yes, but at least a self-governing nation making responsible decisions.

The governance of the country has been facing many dilemmas which emanate from the same premise that we never had to fight the battle for survival and did not go through the basic social and democratic process of evolution.

The short-sightedness of leadership, its obsession with cheap popularity and the drive to perpetuate their power led to a sequence of decisions that sowed the seeds of theocracy. The plant, now a deep-rooted tree in our society and polity, has made us dogmatic, fanatical and extreme in our religious attitudes and practices.

An account of the long array of irresponsible, meaningless though purportedly sincere, decisions from August 1947 to December 1971, leading to the perpetuation of personal power, are beyond the scope of this text.

It is not that there was no agricultural and industrial development in this period or the people and the government were not somewhat prosperous, especially compared with India and neighbouring countries till the 60s, but this whole edifice was as fragile as a house of cards and the rot it triggered is still eating into our vitals.

Moreover, in order to put a broken Pakistan back on track, we made some good, but mostly bad, decisions, like nationalisation from 1972 to 1977. Then again, we were back to merry-making on the US dollar aid from 1979 to 1988 and again from 2001 to 2010, when our frontline services kept us away from genuine economic, social and political evolution and development.

To make things worse, through the 90s, and from 2010 till today, when there was no foreign aid, our lifestyle, decision-making and national habits remained stuck to, and followed, the same spending pattern which was the hallmark of dollar-aid days.

Only this time, the aid was replaced by high interest foreign loans but lifestyle of the elite and spending habits of the government remained the same. As Albert Einstein is reported to have once said, “insanity is making the same mistakes and expecting different results.”

In my view, this absence of the process of evolution and the battle for survival, has, in a big way, led us to the morass and mess we are in today. Had Pakistan not been provided these crutches of international in different period, we would have thought a hundred times before signing the free trade agreement with China, precious Sui gas reserves would not have been burnt in CNG vehicles, and most of all, expenses of governments would have been kept in check.

As per the latest budget, expenses of provincial and federal governments are about Rs14 trillion, in which non-defence and non-development expenses of the federation and provinces are Rs5.5 trillion.

Again, dependence on aid and later loans never forced us to improve governance. If we were a nation reliant on our own resources, we would have gone for more prudent and frugal decisions rather than increasing the size of government, installing super high cost power plants and building grand offices and unnecessary infrastructure

In such a scenario, we might have been poorer, may be facing load-shedding, may be managing with a less grandiose government with relatively moderate spending habits and lesser consumption of imported items. But we could have avoided the present sharp budgetary and current account deficit.

Education and health, on which the government spends about Rs1.5 trillion every year, would not have been in such a pathetic state so as to force even the lower middle-class families to opt for private schools and hospitals.

Similarly, our tax system could have been simpler, fairer and more efficient; our administration and police would have helped the people instead of helping the government in exploiting them; our foreign relations would have been based on trade, investment and universal friendship rather than spurred by enimity and the need to beg for help.

There may be other reasons for this phenomenon of inverse development that we face, but Pakistan’s history of not making good decisions, ignoring the opportunities that knocked at our doors and stagnating direction-less in a state of Newton’s inertia, top the list.

And hence the state in which this country and its multitudes are stuck and will remain in this state of limbo until they find the will, direction and energy to break away from this stifling orbit of status quo.

As Faiz put it, visal-e-yar, is desirable, indeed, but visal-e-yar is not just a matter of wishful thinking.

 

THE WRITER IS REVENUE LEAD, REVENUE MOBILISATION, INVESTMENT AND TRADE PROGRAMME (REMIT), EX-MEMBER POLICY FBR AND EX-ADDITIONAL SECRETARY, MINISTRY OF INDUSTRIES AND PRODUCTION