Eco­nomic Risks

Enterprise - - Economy -

Af­ter suc­cess­ful com­ple­tion of the eco­nomic sta­bil­i­sa­tion pro­gramme im­ple­mented on the ad­vice of the In­ter­na­tional Mon­e­tary Fund (IMF) over the past three years, the govern­ment seems all set to switch from the fis­cal tight­en­ing strat­egy to the fis­cal ex­pan­sion­ary strat­egy.

The IMF has com­mended the govern­ment for fol­low­ing its ad­vice and has wished it good luck as it treads to­wards the growth path.

“I think that is a sen­si­ble ap­proach at this stage,” Ma­sood Ahmed, di­rec­tor of the IMF’s Mid­dle East and Cen­tral Asia depart­ment, told the me­dia.

“They have built up their re­serves, they have halved their bud­get deficit, their growth rate is pretty much the high­est of all coun­tries in the re­gion broadly de­fined,” he added. “The next phase is to con­tinue with the re­forms they have on struc­tural mea­sures that will sub­stan­tially raise their growth rate and par­tic­u­larly raise their ex­ports.”

The up­com­ing bud­get for the fis­cal year 2016- 17 is more likely to re­flect this strat­egy of the govern­ment whereby it will try to achieve higher growth. The govern­ment aims to set a tar­get of 5.5 GDP growth for the next fis­cal year.

Im­proved se­cu­rity sit­u­a­tion, bet­ter en­ergy sup­plies, low oil prices and in­creas­ing pace of work on the China-Pak­istan Eco­nomic Cor­ri­dor ( CPEC) should all help the govern­ment to achieve higher growth in the re­main­ing two years of the ten­ure in the of­fice.

There­fore, in the com­ing months and years, one could hope for more eco­nomic ac­tiv­ity in the coun­try, an in­crease in job op­por­tu­ni­ties, more in­dus­trial pro­duc­tion and a rise in the ex­ports. How­ever, these ac­tiv­i­ties largely hinge on the po­lit­i­cal sta­bil­ity in the coun­try.

Our eco­nomic in­di­ca­tors were as good in 2007 rather in some ways bet­ter as they are now but

the po­lit­i­cal turmoil un­leashed over a row be­tween the then mil­i­tary ruler and the then chief jus­tice ul­ti­mately re­sulted in the loss of what had been achieved on the eco­nomic front. The coun­try had swung back to square one.

The World Bank in its re­port on ‘Global Eco­nomic Prospects’ last year main­tained that po­lit­i­cal un­cer­tainty in Pak­istan has re­mained a ma­jor fac­tor in the eco­nomic progress of the coun­try.

To un­der­line its point about the im­pact of po­lit­i­cal sta­bil­ity on econ­omy, the re­port said eas­ing of the po­lit­i­cal cri­sis trig­gered by the Pak­istan Tehreek- e- In­saf ( PTI) sit- in in Islamabad in late 2014 has helped the govern­ment in achiev­ing strong growth in the ser­vice sec­tor. The re­port said it also paved the way for the con­clu­sion of ma­jor in­fras­truc­ture and en­ergy agree­ments with China.

Moody’s Credit Ser­vice in its lat­est as­sess­ment of Pak­istan’s credit pro­file made a sim­i­lar con­clu­sion. Though it as­sessed Pak­istan’s eco­nomic growth as mod­er­ate, it main­tained that in­sti­tu­tional and fis­cal strength in Pak­istan are very low while its vul­ner­a­bil­ity to po­lit­i­cal risks is very high. No coun­try in the world is im­mune to po­lit­i­cal cri­sis, but po­lit­i­cal un­cer­tainty pre­vails almost per­pet­u­ally in Pak­istan.

More­over, fis­cal and in­sti­tu­tional bases in other coun­tries are so strong that they could sus­tain and eas­ily ab­sorb shocks of the po­lit­i­cal cri­sis but, un­for­tu­nately, Pak­istan lacks such strengths.

Though the govern­ment cur­rently is bask­ing in the glory of achiev­ing macroe­co­nomic sta­bil­ity in the past three years and is now aimed to cap­i­talise on these achieve­ments in the re­main­ing two years of its ten­ure, the ris­ing po­lit­i­cal chal­lenges for its em­bat­tled lead­er­ship are mak­ing it a task dif­fi­cult.

The cri­sis trig­gered by the Panama Leaks, in­volv­ing the chil­dren of the prime min­is­ter, who were in the busi­ness of in­vest­ing in for­eign tax havens, is deep­en­ing with each pass­ing day.

Though of­fi­cials of the State Bank of Pak­istan as well as an in­de­pen­dent lawyer told the Se­nate Stand­ing Com­mit­tee on Fi­nance that it is very hard to prove wrong­do­ings on the ba­sis of Panama Pa­pers be­fore the pro­posed ju­di­cial com­mis­sion was set up by the chief jus­tice on the prime min­is­ter’s re­quest, the op­po­si­tion seems in no mood to ease its pres­sure on the govern­ment.

Im­ran Khan’s party has al­ready launched an anti- cor­rup­tion cam­paign to mo­bilise pub­lic opin­ion for its stance, while the Pak­istan Peo­ples Party (PPP) and other op­po­si­tion par­ties have also stepped up pres­sure on the govern­ment, though less fer­vently. They aim to press the govern­ment to al­low a trans­par­ent and im­par­tial probe into the wealth sources of the prime min­ster and his chil­dren.

The govern­ment, which en­joys com­fort­able ma­jor­ity in the par­lia­ment, and con­trols Pun­jab, po­lit­i­cally the most im­por­tant province of Pak­istan, has also tough­ened its stance and de­cided not to suc­cumb to the op­po­si­tion pres­sure. It has re­fused to amend the terms of ref­er­ence it has pre­pared for the pro­posed ju­di­cial com­mis­sion.

More­over, the re­ported grow­ing chasm be­tween the govern­ment and es­tab­lish­ment has added to the po­lit­i­cal un­cer­tainty in the coun­try.

These po­lit­i­cal ten­sions may not nec­es­sar­ily desta­bilise the govern­ment, but they could ag­gra­vate the po­lit­i­cal un­cer­tainty that ul­ti­mately could neg­a­tively af­fect eco­nomic de­vel­op­ment of the coun­try.

More­over, it has the po­ten­tial to de­tract the govern­ment’s at­ten­tion from its ba­sic re­spon­si­bil­i­ties.

There­fore, the govern­ment, the op­po­si­tion, as well as other stake­hold­ers need to act re­spon­si­bly and not to be car­ried away by the short- term po­lit­i­cal gain for the sake of the larger na­tional in­ter­ests.

Though the prime min­is­ter is not linked to any off­shore com­pa­nies and thus, legally speak­ing, there is no onus on him to prove his in­no­cence, he owes a lot morally to the peo­ple of Pak­istan who have voted him into power.

Such cases are very dif­fi­cult to be proven in the courts of law, but they are easy to be pleaded in the court of peo­ple.

Like a true demo­cratic leader, the prime min­is­ter should come out with doc­u­men­tary ev­i­dence to es­tab­lish that he has noth­ing to do with the Lon­don prop­er­ties and off­shore com­pa­nies and all this for­tune was made by his chil­dren with­out his pa­tron­age and through sheer hard work of their own.

This is the only way that could save the coun­try from po­ten­tially an­other ma­jor po­lit­i­cal cri­sis.

Prime Min­is­ter Nawaz Sharif may ride through this cri­sis, as many peo­ple be­lieve, but it may con­tinue to haunt him through­out his po­lit­i­cal life. There­fore, it is high time for him to stand up to the oc­ca­sion and prove his de­trac­tors wrong.

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