Pakistan Economy Updates


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My comment was more in the context of establishment stability. My thesis (so to speak) was, be it authoritarian or democratic, if the economic base is satisfying enough of the population, the public resistance to the establishment generally tapers off.

I highlighted Bangladesh because (at least based on the conversations I had with people living there) the public seems to value perceived economic benefit over the Hasina government's authoritarian bent. Admittedly, it's an anecdotal observation, but I genuinely do believe Bangladesh is a place where high public discontent can displace the top no matter how strong or brutal the top is.

The issue with Pakistan is that no party or group made fundamental changes to the economy since Bhutto Sr. and Musharraf. In both cases, they benefitted certain groups but left many in the dust. There hasn't been a broad economic uplift akin to Bangladesh IMHO. I don't know if PTI will do it, but if they do, the opposition will lose energy. If that happens, then IMO, the PTI will re-engineer Pakistan's political environment to cement itself at the PPP and PML's expense. I'd say the PPP is a more attractive target as displacing it unlocks Karachi and, if leveraged right, could open a wellspring of power and influence for PTI and its backers.

But it's really an issue of perception. If the right people perceive things are going their way, then they'll support whoever is leading them to that direction. That's what will give PTI stronger roots in the population and, in turn, enable it to displace other parties. Now whether those perceived economic uplifts or benefits reflect true economic prosperity or not is a different story. PTI can 'finesse' this too, and I wouldn't be surprised if they do as, ultimately, they're another Pakistani party that was let into the power corridor.

Bro I understand what you mean, but how will there be establishment stability if there is constant "veto" above elected govt layer?

Authoritarian vs liberal (in that elected realm) has not much to do with that in the essentially there are higher power layers that are totally unaccountable to almost anything.

This is why comparison with Bangladesh or say even PRC (both cases the military are firmly underneath another layer of power) is ultimately meaningless as there has not been sustained resolution and clarity in Pakistan power matrix.

This is the issue that is simply not confronted by enough Pakistanis (that have time and buffer to do so in discourse and research).

It is what the SBP runs into time and time again when (new/fresh elements of) it tries to address root components of persistent stagnation in such things as capital account and the larger bedrock of savings/capital formation.

Current account deficit is merely a symptom/effect of these two things. Addressing it in one year will not bring much respite past that (as Pakistan has seen multiple times already).

Just take a look at gross domestic savings for example between Pakistan and Bangladesh:

Bangladesh problems/challenges (and I can list many, quite serious persistent dissonant ones too, well past the forex overstating, GDP inflation and bad credit rating, lack of larger technocratic+corporate verticals) are of different paradigm now because they have managed to enter "phase 2" and "phase 3" of the argument by growing their savings ( THE core part of the onion) and thus capital formation (the basic fulcrum for any further investment levers).

BD phase 1 has resolved itself largely:

- Military under control of higher power structures
- Military to begin with has low fiscal footprint/influence
- 0% tariff access to large wealthy markets for particular industry (RMG) that BD has focused on expanding

To be able to have grown from 10 billion to 80 billion now in domestic savings....and on its way soon to reach clear triple digit bn figure here soon.

Whereas you will find Pakistan is stuck at the 20 billion dollar level (at one point it was enough to be double that of BD in early 2000s) to this day.

It is simply not useful for Pakistan to compare itself on non-core matters (ahead, same or behind) because the root core cause (phase 1 stuff) is simply stuck with the savings number (a basic trust dividend from larger population) clearly illustrating it.

This is fuel in the tank stuff....before we can talk about the car and roads it on....and matters of expanse and nuance past it.

But the walk around eggshells manner this involves when you bring up (core stuff) with those that feel they must carry water for the unaccountable powers that be...for all kinds of reasons/inertias known to the psyche that seems to have set in quite deeply in areas of "debate".

It is why Pakistan will be stuck in this 20 billion saving zone this decade too. If you cannot question "why" (even the SBP cannot) simply cannot be addressed.

If it cannot be addressed, everything under the sun except that stuff will be talked about instead....but meaning very little of significance.

This explains the larger conundrum and the microcosms that harness and transmit the same.


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Is he wrong?
It's not question of being wrong or right which themselves are open to the individual. This is more to how something is spun.

All part of the reason they have silenced me (and the Turks that you find here)...which I will get to later maybe. Its all part of the root cause.
They silenced me as well. Let's try not to read too much in that.


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I shall include your leaders in my silent prayers for a miraculous intervention by non other than Azrail :)


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Post-election challenges

PAKISTAN voted on Feb 8 in an election full of surprises and upsets. This was a pivotal poll in the backdrop of the political tensions and uncertainty of recent years, which left the country in a polarised and unstable state.

A lacklustre campaign didn’t discourage people from showing up at the ballot box in greater numbers than predicted. This was testimony to their stake in the democratic process, indicating they felt their vote mattered. The turnout defied the narrative that the election outcome was a forgone conclusion. When results were in, it became clear that this narrative had overlooked electoral dynamics and public sentiment on the ground.

The Election Commission of Pakistan did not cover itself in glory by its inexplicable tardiness in announcing election results. Despite its claim that it had set up an improved system to announce results, the inordinate delay evoked sharp criticism and allegations of foul play. Internet and mobile network disruptions added to the controversy and earned both ECP and the caretaker government justified criticism. PTI leaders claimed “winning seats had been turned into defeats”. Several Western states urged investigation into poll irregularities.

Voters delivered a divided mandate and hung parliament. Results from 265 national constituencies showed PTI-backed candidates winning the most seats, followed by PML-N and then PPP. PTI candidates swept KP and made a strong showing in Punjab.

PML-N’s wins were mostly in Punjab, while the PPP held on to its traditional stronghold of Sindh, also securing seats in Balochistan. PTI’s performance in the face of curbs, denial of its election symbol and with all its top leaders in jail showed that a sympathy wave and determined voting by supporters carried its candidates across the finish line.

Both PML-N and PTI leaders declared victory and claimed they were the single, largest party or bloc in the National Assembly. But neither won a simple majority which left no party in a position to form a government on its own. This makes government formation an imposing task, which will involve tough and protracted bargaining and political horse-trading. This, of course, is not new. Pakistan has long had coalition governments, and that era is far from coming to a close.

Pakistan has voted for democracy but healing and reconciliation are needed for stability.
The question is how long government formation can take even if PML-N, with the pre-election alliances it forged with smaller parties, is in the best position to do so. The poor performance of Istehkam-i-Pakistan Party and JUI-F adds to its difficulties. On the other hand, PTI-backed candidates face the challenge of remaining a cohesive group as efforts will be made for them to switch sides and join a PML-N-led coalition.

PPP had said earlier it will reach out to independents but the numbers do not suggest it can cobble a coalition together. For a PML-N-PPP coalition to emerge, which Nawaz Sharif is now working for, the hostility between the two parties has to be overcome. In a conciliatory speech, Sharif has also indicated willingness to reach out to ‘independents’.

How the 70 reserved seats are allocated will play a key part. They are supposed to be distributed in proportion to the total general seats won by parties. Not being recognised as a political party will deprive PTI of any of these and create an anomalous situation where reserved women and minority seats will simply be distributed among other parties, augmenting their numbers ‘artificially’.

Whoever is able to form the government will face several daunting challenges. The most important is dealing with an economy that is still in the critical ward. Soaring inflation has fuelled a cost-of-living crisis, which has played into the election, with PML-N’s inability to secure a majority partly attributable to the burden of incumbency given its record in the PDM government it led until last August. The next government will have to expeditiously negotiate a fresh, extended programme with the IMF as the stand-by arrangement will end in March. This is urgently needed for Pakistan to meet its heavy foreign debt liabilities in the years ahead.

But a weak coalition government will dampen the prospects of wide-ranging economic reforms that Pakistan desperately needs to put it on the trajectory of sustainable growth and investment. If the next government is a minority one, dependent for survival on appeasing a motley group of parties, will it be able to take tough and politically painful decisions to extricate the country from the economic crisis?

The fall in share prices on the stock market and weakening in Pakistan’s sovereign dollar bonds in the wake of the election reflected uncertainty about the prospects of political stability and meaningful economic reform.

The political challenge will be no less demanding. Whoever forms the government will face a numerically strong opposition in the National Assembly. That will make legislative work an onerous task apart from having to deal with what is expected to be a noisy parliament. Moreover, with the country so divided and polarisation reinforced by the election, this too has implications for the incoming government.

The regionalised nature of the election result in the provincial assemblies will be another challenge for the government at the centre. With the PPP running the Sindh government, PTI controlling KP, PML-N forming the Punjab government, the federal government will face the test of managing the country when three of the four provinces are governed by different political parties, at loggerheads with each other.

The next government will also have to deal with the challenge of establishing smooth and stable relations with the military which in recent years has acquired a much larger role in politics and governance, even in economic and investment matters. The state of civil-military relations could be a key factor that determines the longevity of the coalition arrangement.

An election that people hoped would deliver political stability has ended up creating a host of uncertainties and issues of legitimacy. The country is in dire need of stability that can only be established by a process of reconciliation and healing. Voters see democracy as the best path to achieve stability. But the question is whether the country’s leaders can live up to the challenge of working democracy in the public interest and not just their own. n

The writer is a former ambassador to the US, UK and UN.



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*Atif Mian* is an outstanding economist of international repute. His observations on our economy & politics are worth reading.

*What Feb 8 elections mean for Pakistan*

Pakistan’s economy has consistently fallen behind globally – last year was one of the worst, with the economy actually contracting

Every macro fundamental is flashing red: inflation, growth, debt & investment, to name a few.

The federal gov has no money. It cannot even afford to pay the salary of a peon or a soldier without borrowing.

The entire tax revenue is consumed after paying provinces their share, pensions to retirees, & interest on debt.

Inflation cannot be controlled when the entire govt is run on deficit.

Growth is impossible when govt has no money to invest in the future.

And lack of growth makes every problem worse.

The country is bankrupt. It is sinking deeper every year.

I have never seen such despondency.

So many wanting to leave, established firms no longer comfortable investing.

Yet no leader has a viable economic plan for the future.

The shady establishment that calls shots from behind is especially clueless.

SIFC? ... Really?

You expect foreigners to believe in the country when your own people are losing all hope?

It is in this backdrop that Feb 8 elections were held.

People are mad – and they have every right to be. 442,353 children died in Pakistan just last year due to poverty.

That is almost half a million dead kids EVERY YEAR.
But the establishment was busy playing its usual games – put this one in jail, and that one in parliament this time – keep the system just unstable enough so we stay relevant – our children be damned.

They obviously sensed the people’s anger, so every action to rig the elections was taken. Except it only made the public madder.

So here we are post Feb 8 – the distance between the ruler & the ruled has never been wider.

Do they understand how dangerous that is?

There is an attempt – once again – to cobble together a compromised group.

No one has a plan to fix the economy.

But even if they magically did somehow, they cannot do anything. Bcoz they have lost all trust with their people.

They are foreigners in their own land.
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