A HIGHLY negative recurring theme in the history of Pakistan is that good events don’t last long. In fact, their length is getting shorter with time. For instance, Musharraf’s spurious economic spurt lasted four to five years while the PML-N’s lasted two.
The shelf life of positivity has shrunk even more under the ‘tsunami’ party, to a few months and even weeks. There was first the economic story sparked by its dubious claim that the growth rate for 2020-21 was 3.9 per cent. The euphoria barely lasted three to four months before a fast-increasing current account deficit, high inflation and precipitously falling rupee got together to perform the burial rites for that story written in Islamabad.
Lady Luck was even more cruel to Pindi as the euphoria over the Afghan Taliban win and Indian loss vanished within weeks given the stark realities. No state, not even China and Russia, has recognised the Taliban regime. Naya Taliban are in no mood to change their savage, mediaeval ways. Afghanistan may face economic and security collapse with big spillover effects on us. In fact, these two factors plus two others — domestic political tensions and a surly mood towards us globally — have unleashed a gathering storm that may not miss us, unlike Cyclone Gulab. These four factors may feed each other to create a vicious, widening circle.
First, the economy. States strive for macroeconomic stability, ie a stable and high growth rate; low current account and fiscal deficits, debt and inflation; stable interest and exchange rates; and adequate foreign reserves. All these are headed the wrong way, except foreign reserves which too may deplete fast.
Unlike Gulab, this cyclone may not miss us.
The rupee’s nosedive in particular has created huge market panic. While the State Bank cannot and should not pump dollars into the market, the continuous fall will fuel inflation, curb growth and discourage investment without perhaps increasing our inelastic exports. Thus, the State Bank must find other ways to halt this free-fall.
An IMF programme resumption may help stabilise the currency and in fact the rupee’s steep fall, and utility and energy rate hikes may partly be prior actions to resume it. But it will consign us to slow growth and public misery for the rest of the PTI’s term. It will become the first government in a long time to spend almost its entire full term under IMF care with negative impact on its electoral fortunes.
Second, the domestic political situation could deteriorate fast as the PTI seems hell-bent on bulldozing through contentious political initiatives. This includes extending the term of the controversial NAB chief through dubious ordinances so that he can continue victimising the opposition while ignoring government cases.
More worryingly, it includes implementing the full use of electronic voting machines in the next elections despite almost complete consensus among the ECP, opposition and neutral experts that this could badly undermine poll credibility. EVMs emerged in the West not as anti-rigging tools but efficiency-enhancing and labour-saving devices as part of broader automation trends in society. There is little evidence and in fact much concern even globally about their rigging-reducing potential. The PTI’s claims about their anti-rigging potential without evidence raise suspicions about its real agenda. Political turmoil will aggravate the economic malaise.
Third, there is the rapidly slipping situation in Afghanistan that is now saddled with arguably the worst regime globally given its autocratic tendencies, mental backwardness and sheer incompetence for running a modern state. The major risks from that are huge human rights violations against women, minorities and the press; increased political tensions; and resumption of war and economic collapse. The chances of all this are heightened by the global reluctance to recognise the Taliban despite our pleas. Economic and political turmoil could dash our fond hopes of regional peace and connectivity and catalyse a strong wave of refugees and terrorism to cross the Durand Line.
Finally, there is the surly mood in key Western capitals towards us, as reflected in parliamentary discussions both in the EU and US. Given our weak economic status, we need Western help on IMF, FATF and GSP-Plus. In fact, it is not ties with just the West. The Chinese also seem disillusioned while the Saudis remain cool. We have perhaps never been so estranged.
These four factors could together destabilise both Pakistan and Afghanistan badly. The root cause underpinning this multidimensional malaise is the desire of our powerful forces to impose meek regimes on both sides of the Durand Line and control the destiny of both states. Given their obviously limited capacities, it is no surprise that both countries are in deep trouble.
The writer is a political economist with a PhD from UC Berkeley.