Brace for rough flight of economy

Purchasing power of rupee to fall even further, and much rapidly than before

ISLAMABAD:

Dear fellow passengers of PK-1947, this is your fellow passenger speaking, as we have many pilots but no one is in control. We are flying on autopilot since long. I have some important announcements to make.

First, we have started descent for a few decades but the ground or destination is not in sight yet. We are passing through a global air pocket (economy) that is causing huge turbulence. Moreover, our fuel (fiscal) power is running extremely low.

We are relying on tailwinds (temporary fiscal support by friendly countries) to stay afloat but these are not sufficiently strong. The headwinds (debt repayments) are getting stronger every passing day, and we are not sure how to maintain the elevation and speed.

[The global economic slowdown has affected us due to decreasing exports and increasing cost of imports. Moreover, the ever piling debt repayment burden is not met with any practical or sustainable solution.

Temporary deposits are not solutions at all. There would be a serious situation in the coming years due to this problem – sovereign default being the least consequence of these.]

Second, we are running low on food and resources. You must recognise and accept that food will be served free, on priority, to the first class, followed by the business class and then sold to the citizen class.

I apologise that you would have to bear the cost, of this food, that includes provision of free food to first and business classes. The right to food, as a fundamental right, may be written in your terms and conditions (constitution) for flying as citizen, but neither you recognised and raised this ever, nor you ever challenged the self-assumed rights of privileges by first and business classes.

[The food security situation is getting extremely serious with increasing population and demand, and decreasing agriculture and water resources. There is no long-term planning in sight.]

Third, our engines and machinery of the plane are deteriorating fast, as research, innovation and industrial activities are decreasing consistently, and quite rapidly recently. The depreciation of equipment and machinery has outpaced the availability of required skillsets.

In addition, the cost of operations has increased significantly, therefore, many of the machines (industries) have started shutting down.

[There is a phase that could be termed “de-industrialisation”, undoing the industrial progress of previous decades.

The lack of applied research and innovation, unavailability of requisite skilled labour force, rising cost of inputs, hardships or virtual ban on imports have brought large and small industrial sectors to their knees. This will have very serious consequences in the medium to long term.]

Fourth, some of you are complaining that your rupees can buy much fewer snacks than the start of our flight. However, I must let you know that the purchasing power of rupees is going to decrease even further, and much rapidly than before.

This is due to increased prices (inflation) but also the exchange rate as we need foreign currencies (especially US dollars) to purchase much of the stuff we consume.

We do not want to compromise on your luxuries’ style and demand, especially in first and business classes, therefore, I would request the citizen class to either bear this pressure or get in the business or first class, if you can.

[The exchange rate of Pakistani rupee versus the US dollar has been on a free fall. Without going into details of factors, including the IMF assertion to respect market forces, one can easily guess further devaluation in short to medium term.

The upper class is relatively immune as they own productive resources and would compensate through increasing costs of goods and services they sell. However, the middle and lower class is going to suffer seriously.

It is not unlikely that the economy of Pakistan becomes “dollarised” as it is a relatively safer means of transaction.]

Fifth, due to the rising cost of energy production in the plane, we will charge every passenger of the citizen class for use of air conditioner. It will be free for first and business classes though.

[It is expected that there is no other way than to increase prices of energy, especially electricity.

No increase in productive capacity is in sight, therefore, in order to meet increasing demand and remove subsidies, the only way is to continue increasing petrol and electricity prices. This will have very serious consequences, including the major cause of social unrest.]

Lastly, despite all of these announcements, no one has intervened from the crew yet. It means that they are neither listening to us, nor bothered about what we are feeling or going through.

Thus, we are left at the mercy of various factors and externalities, without any flight path or destination in sight. Get ready for a very rough flight ahead, as long as we are afloat.

The writer is an international economist

 

Published in The Express Tribune, August 28^th, 2023.

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