Talking business
The new situation presents some openings to the economic managers. For instance, it might be harder for the IMF to hold Pakistan strictly to its targets now. Just like our political leadership is adept at using moments such as these to wring donor promises and sympathy from the international community, our economic managers are also skilled in using such moments to tell their creditors to back off. And back off is exactly what the IMF is going to have to do.
Gone are the ceilings on budgetary borrowing and the fiscal deficit. Who is going to tell this government that they shouldn’t spend at a time when they are faced with the largest reconstruction and rehabilitation job the country has faced in years?
But if we should expect to see runaway borrowing and spending in days to come, what will that mean for inflation? Or is that asking for too much from our economic managers? Is there a way to borrow and spend that is not inflationary? If so, somebody please share it with us soon! We need all the insight we can get to get through this.
What have the floods done to our cotton crop? We’ll know once the waters recede, but the impact will continue long after that. Unfortunately the rains have come precisely at the time when most of the crop is beginning to bud, and is ready for the first application of pesticide. Since the floods have hit the cotton belt very hard, it’s logical to expect some damage, folks at the Cotton Exchange tell us they’re bracing for losses between one to one and a half million bales.
What have the floods done to the stocks of wheat that have been piled up at procurement centres? From last year as well as this year? A few months back I had the opportunity to visit some of these procurement centres in locations very close to those that have been inundated today around Muzafargargh, and saw how huge mountains of wheat were stacked up in bags lying under open skies. Those very same areas have now seen seven feet of floodwater, and in some cases even more. What is the estimated loss to our estimated stock of 28 million tons of wheat? And coming precisely at the time when the price of wheat is beginning to climb in international markets!
How many grid stations have been submerged by the floods? A lot of our major power houses appear to have been spared, except for AES Lalpir. But Guddu thermal, right next to Guddu barrage, that provides around 1000MW to our national grid and is the largest contributor of electricity to Baluchistan has been spared, as has KAPCO. Major transmission lines also appear to have withstood the flooding of their bases. But what about the thousands of grid stations that must be submerged under muddy water? How long will it take to bring them back into operation? At what cost?
A game changer indeed. If there are widespread losses to our wheat stocks, what happens to its price in the cities? If there is widespread damage to the cotton crop, what effects will this send up the cotton supply chain? If there is widespread damage to our power distribution infrastructure, how long will the affected towns , cities and farms go without electricity?
I sincerely hope our economic managers are awake to the flood of consequences that is coming their way. Their political overlords have not set an inspiring example thus far, with either callous disregard or chasing photo ops. Let’s hope the finance minister lives up to his reputation as a “competent manager” and manages to raise the resources and oversee their allocation without creating inflation. This is the biggest test of his leadership today. We’re all watching closely to see how he faces up to it.
the writer is Editor Business and Economic policy for Express News and Express 24/7
Published in The Express Tribune, August 9th, 2010.
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