Daily Times

India, Iraq, Bangladesh, and Vietnam are some of the fastest-emerging economies in the world. This growth came despite the aftermath of COVID-19, amidst the Ukraine-Russia war, global supply chain disruption, and rising inflation. One must wonder, what did these countries do differently that Pakistan did not.

In a statement in June 2022 the then Finance Minister, Mr Mifta Ismail said, “If the menace of maladministration was not addressed promptly, it’d cause further devastation.” Any man of wisdom would ask how administrative, or management failure suddenly became a subject of interest for the finance guru. What is more interesting is that Pakistan has always stumbled in the management of its institutions, international relations, and monetary matters all contributing to monetary challenges. The saddest truth is that the mismanagement of Pakistan’s economy is an open secret, the white elephant in the room that no one dares discusses.

In a 2017 publication, Mismanagement of Pakistan’s Economy and Choices for the 1970s, Haq discusses Pakistan’s socioeconomic policy options for the 1970s in the context of the economic policies of the 1960s. In the 1960s, the unrelenting focus on growth, which was in some respects necessary, came at the expense of social justice. The consequence of the ‘decade of development’ was the escalating regional disparity. He emphasized that Pakistan’s long-term economic planning requires a new development strategy that places less emphasis on material products and services, relies more on self-help than aid, and grants provinces greater economic autonomy.

The extent of the damage caused by the inundation is attributable to the Pakistani government’s failure to implement domestic policies.

I would bravely use the long-forgotten term, “kakistocracy” here to accurately define the crux of the situation here. Coined in the 19th century, kakistocracy refers to a government run by the least qualified or worst people. One does not have to even look at the breadcrumbs to reach this conclusion in fact one can simply analyse the long trail of financial and administrative failures during the last seventy-five years.

On top of any economist’s list would be the monetary leakages and losses incurred by state-owned enterprises (SOEs). With over 85 SOEs and their 85 subsidiaries, Pakistan incurred debt worth Rs 1.74 trillion in May 2022. A report by the Ministry of Finance claimed, “More than 98% of the government’s assets and almost 100% of the losses in the SOEs portfolio are related to commercial SOEs.” These organizations include oNHA, Pakistan Railways, PIA and power sector DISCOs as the top 10 loss-makings SOEs. Even though the current government claims that it is ready to present the SOEs bill in Parliament for better management of loss-making entities that includes cross-working teams from IMF & ADB and has been in the making since 2021. I wonder if we have the executioners to sail us through the real challenge here.

The economic loss to Pakistan due to natural causes as a direct impact is projected to be around 2.2 per cent of FY22 GDP, potentially pushing between 8.4 and 9.1 million more people below the poverty line and displacing over 8 million people. This further led to a food, health, residential and employment crisis. Many flood-hit regions in the country remain at the discretion of the government which is seen as the provider and the last hope of many. According to a report issued by the Planning Commission of Pakistan, the agriculture, food, livestock, and fisheries sectors suffered damages totalling PKR 800 billion (USD 3.7 billion) as a result of the catastrophic floods that struck Pakistan between June and August 2022. The total loss to the agriculture industry is estimated to be around $12 billion. If one was to argue that natural calamities are above and beyond one’s control and do not reflect administrative failure, I would also agree. However, I argue that climate change is a variable but not a defining factor. The extent of the damage caused by the inundation is attributable to the Pakistani government’s failure to implement domestic policies. The World Bank granted the nation $250 million for a sustainable water management programme, but this initiative was halted in 2019 due to management issues. The Rivers Protection Ordinance, which prohibits building in flood-prone areas, has not been enforced. The illicit use of floodplains, river banks, torrent hills, and flood channels for cropland and tourist structures has exacerbated the damage caused by flooding. In addition, little has been done to prevent deforestation along the watersheds of Pakistan. This is problematic because clearcutting leads to poor water quality, erosion, and the devastation of ecosystems that absorb some of the effects of floods naturally. Pakistan has not made significant efforts to implement flood-resistance strategies and policies.

Simultaneously, inadequate infrastructure, industry, agriculture, and human development have resulted in inadequate economic growth. In the absence of a comprehensive industrial policy, export-oriented sectors have been unable to provide young generations with the quantity and quality of employment opportunities required. Due to the failure of trade policies to foster diversification, serious macroeconomic imbalances have developed.

With the budget preparations already in progress and as the PDM government prepares for what is being regarded as one of the toughest in the country’s history – reformatory action does not seem to be a topic of debate or priority. Fiscal imbalances, IPP payment management, a trade deficit, tax reformations, or subsidy management will continue to fail if the government does not put its foot down and take corrective actions to ensure that its reformations are sincerely implemented. Hence the only way for Pakistan to come out of its monetary challenge is to ensure corrective action in its management.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.