Daily Times

The Pakistani rupee plunged by about 7 percent last week to its record low in the last decade or so. The downward spiral caused panic in the stock market and turmoil in the foreign currency exchange centres. The US Dollar, started the day at Rs 124.27 but the tail spin continued till around Rs135, before retaliatory measures were adopted by the state bank and some stability appeared although; probably affected by the trauma, some media houses had in between quoted the dollar rate to be Rs139. The plunge overburdened Pakistan with a $7.6 billion increase in loans, without borrowing even a single cent. The prices of commodities, the interrelated rise in the cost of fuel all faced a direct inflationary trend, encumbering the common man, already crushed by the high cost of living and barely surviving.

The political opposition had a heyday and exploited the crash, claiming poor handling of the economy and a belated decision by the PTI government to approach the IMF for a bailout package resulting in the de facto devaluation.

Whereas the ruling PTI must bear responsibility for the slide; since it is in the saddle but to tar and lynch them for the crash would be unfair. Prime Minister Imran Khan had to eat a humble pie for having sworn never to beg for loans only to turn volte-face; two months after donning the mantle of authority. It must have been painful to swallow his pride and sanction the overture to IMF. However, this phenomenon is the cumulative effect of poor fiscal policies for nearly a decade, which were centred on borrowing alone. Historical statistics speak for themselves. The previous government in Islamabad had borrowed $6.7 billion from the IMF in 2013. Apart from obtaining yearly loan packages from different banks, the PML-N government had surpassed all previous records through its additional borrowing of $12 billion in the financial year 2017-18. The former, prime minister, Shahid Khaqan Abbasi, during his last month in office visited China and received a loan of $3 billion only to finance previous loans. By June 2018, when the PML-N government handed over the reins to the caretaker set-up, the external liabilities were just below $90 billion. During the interim government’s watch, the liabilities crossed the $100 billion mark with the current account deficit at $16 billion. Similar economic disasters transpired during 2008 to 2013 regime of PPP.

The sad saga of money laundering over the past ten years, the gravity of which is only coming to light now is a stigma on Pakistan’s economy, having serious ramifications. While the outflow of country’s capital was massive, there was no corresponding inflow except for loans. Despite presenting enormous investment opportunities in Pakistan, local and foreign investors kept away due to poor performance of our organizations and faulty economic policies. The most harrowing aspect has been terror financing, which international watch agencies were not oblivious to and Pakistan landed itself in the Grey List of the Financial Action Task Force (FATF). The threat of being condemned to end up in the Black List, hangs like the sword of Damocles over our head. If Pakistan is thrown in the abyss of the Black List, international financial institutions like the IMF, World Bank will be constrained to avoid it like a pariah state.

The threat of being condemned to end up in the Black List, hangs like the sword of Damocles over our head. If Pakistan is thrown in the abyss of the Black List, international financial institutions like the IMF, World Bank will be constrained to avoid it like a pariah state

The Prime Minister still hopes to avert resorting to IMF for loans if ‘friendly countries’ come through. While the current dispensation is burning the midnight oil to forestall the grim circumstances, currently, it is not apposite to censure them alone for the delicate and frail economic situation of the country. Pakistan is in an economic trap due to massive corruption and subsequent disastrous economic policies, dating back to a decade. PTI can be faulted for not realizing the bleak scenario and instead of just indulging in pre polls rhetoric, it should have prepared a formal road map for tackling the situation. If it was sanguine regarding winning the elections, it should also have done its homework, preparing contingency plans to meet every challenge head on. Imran Khan should not have made emotional promises of smashing the begging bowl. In politics there is never an ultimate decision, some have to be revisited and room for manoeuvre must be catered for.

Asad Umar was being touted as a financial wizard. If so, he should have been primed for facing the debt trap. More importantly, since the going is to be tough, Imran Khan must take the nation into confidence, instead of simply shrugging off that the previous government is to blame for the current morass, a thorough plan of action must be presented to the people so that they may know what to expect and that there is light at the end of the tunnel.

The writer is a retired Group Captain of PAF. He is a columnist, analyst and TV talk show host, who has authored six books on current affairs, including three on China

Published in Daily Times, October 19^th 2018.