John Maynard Keynes wrote, “In the long run, we are all dead”, but for Pakistan, that is where our elixir of life lies.
Pakistan transitioned from a state of severe economic turmoil a few months ago, with State Bank-owned foreign reserves sparsely covering one month’s of imports to securing almost a doubling of foreign reserves following a standby agreement with the IMF, which in turn unlocked financial support from Saudi Arabia and the UAE.
The heavy foreign inflow swooped in as our saving grace, but regardless, we cannot overlook the difference between foreign reserves earned as an asset as opposed to the foreign inflow coming in as a liability.
Moreover, the symptoms of the Dutch Disease are evident in the state of our economy today; the paradox of a seemingly beneficial inflow of foreign resources that eventually rendered disruptive consequences in the economy.
The immediate aftermath of the rise in foreign reserves was the slight appreciation of the rupee and the shrinking spread. However, the relieved state of the nation could not last long as the rupee quickly resumed its depreciative trajectory.
As import restrictions ease, the rupee has currently reached an all-time low relative to the dollar, adding fuel to the rampant inflation.
Unless the acquired finances are utilised as building blocks for capital investment and capacity improvement, which is challenging in the case of Pakistan given our monthly debt bills, the need for such bailout packages will remain a recurring theme.
By now, this may sound like an exhaustingly repetitive mantra economists of the country keep reciting, so let us look past the unavoidable circumstances that are unfortunately now upon us, and instead delve into the much more intricate perspective of approaching our dire circumstances.
By consistently seeking out financial assistance to aid our deficits, without enhancing the capability of our economy, we make use of short-term solutions only to delay the inevitable. To break free from the perpetual cycle of external debt, we must simply look forward, or in other words, we must focus on the long run.
To aid such a vision, we have in our possession what Julian Simon referred to as “The Ultimate Resource”, that is, human capital. While it may be compelling to observe Pakistan’s population as a liability, it is time we treat it as an opportunity.
One of the primary tenets of economics elucidates that a factor of production that is both abundant and inexpensive should be given priority. Pakistan has a hefty population of 241.49 million, more than 60% of which is aged below 30 and around one-third of the population is between the ages of 15-29 years.
In a decade’s time or so, the national economy will begin witnessing a heavy influx of labour force participants. This presents us with an unprecedented opportunity to expand the capacity of our economy as Pakistan’s youth bulge is its golden ticket to long-run bliss.
Now is the prime time for policymakers to turn their attention towards building the capabilities of our youth. This calls for shifting focus to the education and training of students and young labourers.
The government is putting in commendable efforts such as the PM’s National Innovation Award and Skills Development Programme.
Taking measures to sow seeds of youth’s potential today will reap innumerable direct and indirect economic and social benefits in the long run.
Simon’s work highlighted the nature of human mind: how the intelligence of man would eventually lead it to innovative solutions. By empowering and equipping young minds through education, we guarantee an outward shift in our production possibilities.
For instance, focusing on making entrepreneurship possibilities accessible to ambitious youngsters will lift the burden of unemployment vastly from our economy. Once more, government’s endeavours must be applauded as entrepreneurship has been made a compulsory subject for grades 9 to 12.
Furthermore, Pakistan already accommodates a large portion of its labour force in the services sector. By investing in skills that are high in demand globally, Pakistan can turn to exporting highly skilled or semi-skilled human capital; a market that is undoubtedly heading towards a lucrative future given the prevailing technological and strategic global landscape.
This includes skill cultivation panning across IT, management services, financial services, legal advisory and so forth. This will not only make use of an abundant factor of production but will also require minimal capital usage.
Nevertheless, heed must be paid when managing the booming population. A youth bulge is only fruitful when the economy is capable of utilising the emerging labour force. That is, adequate attention must be given to job creation and employment opportunities to support the large labour force.
To adhere to the guidance set forth by Amartya Sen, the capabilities of the population must be augmented. It is imperative to construct a socially sound environment where the educational, health and legal requirements of young individuals are attended to.
Fostering women’s empowerment and addressing biases related to gender, religion and social status in the allocation of opportunities is vital for creating an innovative and rich economic future.
In addition to economically strengthening the youth, it is of paramount importance to provide our young generation with an education that addresses the deficiencies within our present societal framework.
An economy is closely interconnected with its society; economic progress is unattainable without social prosperity. As leaders of tomorrow, the young generation should be taught to prioritise essential attributes, such as tolerance, inclusion and honesty, which every community requires to operate cohesively.
To conclude, as a nation, we must realise the importance of finding a long-term solution to our economic problems. The economy will not be required to depend on external financing if it is able to generate its own capital.
Our inability to meet current expenses highlights the necessity to expand the economy’s potential and capacity. As a populous youth-led nation, investing in human capital is the key to ensuring a positive shift in the country’s potential.
Such a prospect has to be administered over time. Thus, that is why our elixir of life will be found in the long run.
The writer is a student of BS Economics and a content writer
Published in The Express Tribune, September 4th, 2023.
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