What is happening on the streets of Islamabad and how it translates into economic conditions is worrisome. PTI chief Imran Khan’s call for civil disobedience, to stop paying bills and taxes, shows disregard and a lack of knowledge of the economy especially at a time when the government wants to increase tax revenues to fund energy projects and meet IMF conditions. Tax evasion is simply not feasible as most taxes are either indirect or direct, coming from corporations and their employees. Custom duty is at the point of entry and no one can evade it but the state itself, and the business community has already refused Imran’s plea. This one (amongst a few others), Imran Khan did not think through. On the other hand, Qadri’s ten-point revolutionary agenda shows concern for inequality and economic progress. Some of his ideas even sound feasible. He wants the distribution of state land to peasants and decreases in essential food items for poor households; that can actually be done through the Benazir Income Support Program.
The rupee fell the most since 2009 and stocks dropped as the 12-day standoff in Islamabad continues. Stockbrokers have been trying to calm investors, saying that market fundamentals are intact even with falling values. But actual changes in fundamentals are only a theoretical possibility. The market “prices-in” any risk before the risk becomes a reality. So the more that the situation is unstable, the more people will hedge their bets, causing contractions in the markets. Foreign-currency stockpiles fell 3 percent to $13.9 billion as of Aug 15 from Aug 1. The State Bank wanted to increase the reserves to $16 billion by December, but this may prove difficult.
The government doesn’t seem to know what to do and all resources are directed to wards resolving the Azadi March madness. Adding to the chaos, Imran Khan has said that when his party comes to power, the country will not pay back the IMF’s loan. These are irresponsible remarks that will only damage business confidence and Pakistan’s economic reputation. If only we could see past the chaos of the moment, there are greater trials to surmount.