Unattended problems

Published: December 2, 2013
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The problem, however, lies in the simple fact that Pakistan is not considered an attractive place by foreign investors to park their money. PHOTO: FILE

The problem, however, lies in the simple fact that Pakistan is not considered an attractive place by foreign investors to park their money. PHOTO: FILE

Considering the precipitous decline in the country’s foreign exchange reserves, it should not surprise anyone that the rupee’s value has declined sharply over the past year and shows no signs of recovering anytime soon, despite pledges to the contrary from the government. What is astonishing, however, is how a government that was elected on a mandate of better managing the economy has allowed this problem to fester effectively unchallenged since it came into office.

In the short run, the bleeding reserves can be fixed through the bailout loan tranches released by the International Monetary Fund (IMF). But the decline in foreign exchange reserves has its origins in problems that far predate either this or the preceding IMF bailout. In the absence of a large trade surplus, the only way to shore up foreign exchange reserves is to attract investment from abroad. Remittances from overseas Pakistanis help but they are not enough on their own.

The problem, however, lies in the simple fact that Pakistan is not considered an attractive place by foreign investors to park their money. And addressing that problem will require a lot more than a few incentive schemes. It is not as though Pakistan is not on the map for global investors at all. Indeed, the parade of CEOs of major global food and consumer goods companies visiting Karachi recently is evidence of the fact that the world is well aware of the potential of the Pakistani market. What makes foreign investors hold back, however, is our government — and our society’s — unwillingness to confront our problem with violent extremism.

Economics and politics are intertwined in most countries, but in Pakistan’s case, our politics is holding our economy hostage. The narrative that the Taliban are somehow rational actors who can be negotiated with is having real world consequences that scare away foreign capital, deplete our foreign exchange reserves, cause a decline in the rupee, and by extension, cause a rise in inflation through higher imported oil prices. It is time for the government to confront the elephant in the room and tackle militancy head on. Otherwise, all other economic policy initiatives will be meaningless.

Published in The Express Tribune, December 3rd, 2013.

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Reader Comments (5)

  • Maestro
    Dec 3, 2013 - 12:23AM

    Every one’s destiny lies in their choices. Pakistan has chosen it’s destiny of going back to stone age with religious fanaticism and bigotry against non Islamic religions.

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  • iLiberal
    Dec 3, 2013 - 12:57AM

    Nawaz will never confront militancy and extremism head on. And even if it were not the case Nawaz is a terrible manager. His last two tenure are evidence. First tenure was marred by that ghastly yellow cab scheme which destroyed private banks and the second tenure carries the mark of him freezing dollar accounts. Nawaz has never been the sort to take tough decisions. The only thing he’s interested in is filling up his coffers, completing his term and re elections, obviously. This has been the unfortunate case with all the political governments. Is it any wonder that Pakistan has always done well under military dictators. The only thing we’ve ever gotten from these politicians is misgoverance, corruption and nepotism. I think by the time he’ll be done, he’d have damaged Pakistan as much as Zardari has.

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  • Zarb e Hanood
    Dec 3, 2013 - 4:35PM

    ET has misidentified “militancy” as “the elephant in the room”.
    The “elephant in the room” is Pakistan’s obsession with not accepting the reality that there can be no parity with India and instead accepting the reality of its inferior position vis a vis India. In furtherance of this obsession, Pakistan has fanned the flames of religion to motivate terrorists aka “strategic assets” to fight “infidel” India. In a classic blow back, these same religious motivated “strategic assets” have concluded that they are more pious than those who nurtured them and so fittingly have the religious endorsed right to be in charge of Pakistan.
    The bottom-line is that until Pakistan accepts the by scaling back her outsized military ambitions, it is inevitable that Pakistan will lurch from one crisis to another. Attempt of Pakistan to box above its weight class is not a consequence free option as some in Pakistan would like to believe.

    Recommend

  • Zarb e Hanood
    Dec 3, 2013 - 4:36PM

    ET has misidentified “militancy” as “the elephant in the room”.
    The “elephant in the room” is Pakistan’s obsession with not accepting the reality that there can be no parity with India and instead accepting the reality of its inferior position vis a vis India. In furtherance of this obsession, Pakistan has fanned the flames of religion to motivate terrorists aka “strategic assets” to fight “infidel” India. In a classic blow back, these same religious motivated “strategic assets” have concluded that they are more pious than those who nurtured them and so fittingly have the religious endorsed right to be in charge of Pakistan.
    The bottom-line is that until Pakistan accepts the by scaling back her outsized military ambitions, it is inevitable that Pakistan will lurch from one crisis to another. Attempt of Pakistan to box above its weight class is not a consequence free option as some in Pakistan would like to believe.

    Recommend

  • Np
    Dec 3, 2013 - 8:04PM

    @Zarb e Hanood:
    Insightful comment.

    Recommend

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