An economic meltdown- no questions asked?

With declining foreign currency reserves estimated at around $ 7.5 billion and a rupee which is weakening itself against the dollar at a staggering pace, Pakistan has all eyes on lenders and client states for deferral of payments to avoid a default-like situation. The trade deficit is alarmingly high at just over $ 2 billion (recorded for September). At this pace, around a billion dollar is required per month out of the dwindling foreign reserves to help meet the balance of payment. With State Bank intervening to control the fall of rupee against the dollar precipitously, the repercussions in terms of state borrowings should not be discarded whilst studying any rescue plan or aid package to which we have become accustomed to over the last two decades in particular. Increase in the global oil price has been virtually passed to the consumers which have added to the cost of transportation, production as well as the cost of living for many. The energy shortfall has certainly not helped matters much and the longer term implications on our productivity are believed to be severe.

For an ordinary man, at the end of the day it is the inflation rate, at a whooping 25 percent, which matters the most since it severely limits the decisions that he makes for himself and his family. With capital outflows and reduction of expenses and manpower by settled entrepreneurs, SMLB’s (small, medium and large businesses) and industrialists becoming apparent in many sectors it is likely that many people have added, with many more to follow, to an unacceptable proportion of the population that is unemployed. Add to this, the worsening law and order situation and the increase in the crime rate in urban and rural areas with different degree over the same period of the year regardless of these economic conditions that we face and we may see a percentage of those who face unemployed engaged in illicit and violent activities and it will be an instance of failure by the society and the state in general to provide them with a better future which they deserve or at least what they thought they so deserved.

If the government is to be believed, the financial woes of the state, which it has a legitimate claim to govern, were inherited and a result of the dubious economic policies of the Musharraf era with rampant corruption and nepotism. However, all talks of accountability and an effort to evaluate his policies fall on deaf ears or met with the ‘defence’ of ‘reconciliation’ by the government as has the most recent one by the opposition, although it was in the context of his ‘secret agreements’ with the U.S. and concessions he granted to NATO forces without conducting any comprehensive policy appraisals or benefiting the state of Pakistan in a manner which may have been the outcome of a just and equitable negotiation rather than a simple surrender to demands unconditionally without recourse to the effect in the longer run.

‘Reconciliation’ or whatever it seems to suggest, has been used as a blanket cover to protect Mr. Musharraf and his team from the process of accountability which in turn strengthens democracy and promotes transparency as well as provides a check against ‘bad governance’ and corruption. The government’s answer: Mr. Gillani’s ‘forward-looking’ approach which in essence implies: “Forget all past malpractices, lets start afresh”. The question that begs an answer then is: “Is this not a vicious cycle that would never stop and hence no one would be deemed to be accountable as public official over bad governance ever?” A leading English daily’s editorial on Friday lends support to Mr. Gillani’s view, albeit on a different and a worrisome argument. In essence it suggests that since the opposition had rejected Musharraf as a legitimate ruler, it was estopped from questioning his conduct as the ruler! There is a difference between a de facto and de jure ruler for a start and it is amazing how such crude distinctions are overlooked. To put it a slightly different way rather simply, would be to understand that one can oppose one’s legitimacy to rule as well as the actions one took whilst doing so. There is no contradiction in such a view but to the contrary they are supplementary in nature.

In the present economic context for example, had some initiatives been undertaken to promote industrialization and boosting exports during the Musharraf-era instead of for example spending billions in failed campaigning and wasted expenditure in the run up to the elections of 2008, the falling rupee may have been a blessing in disguise for the introduction of our goods in the international market (keeping apart the present international financial crises in some rich markets which is limiting the spending spree of those countries).
As if this was not enough, Pakistan has now complained to the heads of international financial institutions and development partners that the economic cost caused by the war on terror in Pakistan is unbearable level with the major portion of the war being born by it alone. Mr. Tareen, the new Finance Adviser has stated that Pakistan might be amongst the few countries that had successfully adjusted to the unprecedented increases in the prices by eliminating nearly all the subsidies. He stated that the country was fighting a rising inflation by adjusting the interest rates and by containing the monetary growth. However he failed to mention that the revised growth rate for next year, which is down by more than half of the predicted level, had severely limited our capacity to meet the inflation challenge through adjustment of interest rate alone.

On one hand we state the ‘war’ is Pakistan’s own- intended audience is domestic. Yet we seek aid from the global community and the West, particularly the U.S. crying that we are conducting this ‘war’ doing it as an ally and therefore the cost must be shared. What we suggest is either that the people are foolish enough to believe different things at different times or that we are not bound by our own words, which may be changed at different times. The question of policy over the ‘war’ which the joint session of parliament seems to focus and address is secondary. We must first locate and eliminate the contradictions from within ourselves. More urgently, we must await once more that the international loans from ‘friends’ and ‘friendly organizations’ would profit once more through increasing their stake in Pakistan and we are rescued by them to avoid yet another ‘default’. Without conducting ourselves transparently backed by the threat of accountability, the ‘economic meltdowns’ are likely to recur.