The current economic turmoil in Pakistan seems to be unprecedented if a quantitative analysis of macro-economic indicators is undertaken. Politically, the nature and direction of state policy seems to be awash with rampant institutional decay, ad-hocism and myopia. Political realities and economic indicators cannot be understood in isolation. Both inform each other. This calls for a serious empirical investigation. Pakistan (the fifth most populous country in the world) is mired economic, social and political crises. We are living in an epoch where other South Asian countries are growing, both economically and politically, according to concerted long-term policy frameworks, while short-termism and reactive, rather than proactive, policy frameworks have become a recurrent theme in our politico-economic management. In Pakistan, the inflation rate has soared to all time high; 31.5 % in February 2023, leading to depreciation of local currency, higher petrol prices and increased basic commodities prices. Widespread disillusionment, with the capacity of the state to solve ethnic, linguistic, sectarian and gender-based inequalities, exists in Pakistan. But, in the large scheme of things, these social fissures remain on the periphery as the battle for the least advantaged and most marginalized groups in Pakistan is primarily an economic struggle. To find dignified ways in which to achieve basic subsistence. The middle class, it seems, is shrinking. The salaried classes find themselves increasingly crushed under the weight of uncontrollable inflation. Upward social mobility seems to be almost impossible to achieve for the vast majority of the population. For the lower classes, the nightmare keeps getting worse, and they are the hardest hit. We need to move beyond overly deterministic postulations of global economic pressures and reductionist dependency theory frameworks while explaining our current morass.
The country’s economic turmoil has led to slower growth of economic sectors. Statistically, the agriculture sector contributes around 18.9% to the GDP and 42.3 % to the labor force. The sector faces multiple challenges while lacking access to updated technology and infrastructure. Recently, due to the 2022 floods, the sector has suffered damage worth PKR 800 billion. This loss has significant implications for the economy. The decline in local production led to a decline in exports and an increase in imports, leading to a prominent trade deficit. Similarly, the industrial sector is bracing itself for a sharp decline in production, leading to around a 14.8% decrease in textile exports. Not just the textile, currently, this is a dire situation for the steel industry, according of the Pakistan Association of Large Steel Producers (PALSP) due to a sharp surge in interest rates and high cost of borrowing, leading to shutdowns of factories.
The current economic situation of Pakistan is deteriorating day by day. Have we ever thought about where these current circumstances will take us in the near future and what will be long-term consequences? Is there a slow, incremental and gradual path which can be sustainable in the long run? Or do we need broader structural reforms which require a complete overhaul of the status-quo? Adam Smith once posited that a nation is not made wealthy by the childish accumulation of shiny metals, but is enriched by the economic prosperity of its people.” Following this line of argument, do we really understand where are we standing as a nation? Will our next generations forgive us if policy makers do not act swiftly enough to deal with these socio-economic crises? Policymakers should keenly consider and adjust the upward trend of inflation in the country. Decreasing policy rates may persuade the demand for credit and money. Similarly, with low reserve requirements, banks may be able to loan more money which could enhance the businesses. However, a recent surge in the policy rate by 300 basic points led it to 20 % (highest in Asia) in March 2023. According to the State Bank of Pakistan, inflation is expected to increase further in the next few months, which can be critical. Not only monetary, but some of the fiscal changes are also notable; increase in GST and decline in subsidies.
While focusing on economic breakdown(s), the political situation should also be considered. Political instability is adversely affecting the economic interests of Pakistan. Hence, measures should be taken for sustainability, prosperity and economic development. This will require serious efforts by the popularly elected elites to improve domestic manufacturing in Pakistan and make serious efforts to create policies that actively seek to provide redistributive justice to the most marginalized and least advantaged sections of the populace Affirmative action and increased quotas need to be operationalized. Historically, an institutional imbalance has existed in Pakistani politics where the civilian leadership has had to play second fiddle to the non-elected civil and military bureaucracies. Non-elected bureaucracies have assumed control over the rationality of ends, which in the ideal setting should be the ambit of popularly elected politicians while the bureaucracies remain rule-bound, impersonal and only implement the means. The baggage of history continues to linger on leading to widespread institutional decay. Politicians have limited agency considering budgetary constraints and no control over determining regional security or foreign policy. As Kaiser Bengali aptly suggests, the non-combatant military expenditure needs to be cut on a priority basis. Progressive taxation schemes need to be institutionalized to improve the tax-to-GDP ratio. But the broader question remains whether the civilian elite have enough agency in the first place to substantively change the material realities? The federal Parliament stands toothless with no opposition and the standing committees, where most of the actual policy debate occurs remain dormant. Political analysts seem to suggest that the PDM government faltered and should have let Imran Khan finish his term so that his short-sighted approach towards politico-economic management and lack of experience would have been completely exposed, leading to self-combustion. However, the dominant narrative within the PDM stalwarts still remains that things would have been much worse if they had not acted and caused the in-house change. In the current scheme of things, does the PDM government, without having the Punjab in a post 18th amendment setting, stand to lose in the popular courts? That’s a question which will be resolved only on election day and this uncertainty about who will win the next election is intrinsic to the process of formal, procedural democracy. This calls into question the bigger philosophical question whether an electoral democratic order, at least in form, and some semblance of parliamentary supremacy is a worthy pursuit, as an end in itself? If you ask both the orthodox Left and PTI intellectuals, they seem to have lost faith in that endeavor. Something needs to give.
