Daily Times

It is unfortunately obvious to all that the economy is in doldrums and if allowed to continue in this manner, there will be a point of no retrieval. One does not need to be an economist to grasp the basics.

Hike in costs of petrol and electricity is added on to price of goods sold and is never reduced once the price of petrol and electricity are reduced. The government’s Eid gift to the people of Pakistan was increase of price of petrol (motor spirit) by Rs3.86 to Rs103.97 per litre from the existing Rs100.11. It would have been better had the temporary reduction not taken place to avoid the negative cascading effect on goods of all shades and hue.

In an effort to avoid going to IMF for financial help, hoping “friendly nations” will rush forward to our aid, Khan’s government took over nine months to go to IMF. No longer were the easier terms available at this late juncture. Harsher terms were dished out to Pakistan which had no choice but to agree. This delay meant 50% loss of Pak rupee against the U.S dollar in the given period.

This situation has had a negative impact on the people of Pakistan. Repeatedly increasing costs of fuel, power and gas is having a spiraling effect on goods and food items. Pakistan has faced shortages in sugar, wheat etc from which some may have reaped benefits.

State increased the interest rate at 13.5% thereby offering an incentive to save more. This was bound to fail. The economy even before COVID 19 was stalling-after the pandemic it has aggravated the problems. Increasing rates of fuel, power and gas had already pushed up inflation, production had reduced and people were laid off, cuts made in household staff and goods purchased and so on. Pandemic only increased the miseries of the people. Coupled with increasing demands of IMF to comply with their game plan, it can finally take the economy to a point of no return.

The reaction of people dying of hunger and wants unfulfilled cannot be predicted. Already there are reports of thefts and dacoities of well-spoken young men taking place. One does not need to think long for the reason

A shocking news item in a national newspaper on July 31st 2020 declared that, “In a bid to revive the stalled $6 billion IMF programme, the government will have to hike electricity tariff by around 30 percent and put in place a viable plan to erase the monster of circular debt.” Let the reader be reminded that the circular debt is a public debt. It is a compilation of unpaid subsidies by the government that creates accumulation of debt on the distribution company.

Interestingly instead of focusing on the causes of the circular debt, the suggestion is to pass it on to the consumer. Without correcting the reasons of the circular debt, a large portion will start building up all over again. These reasons include transmission loss, non-payment loss, distribution loss, loss due to theft and so on.

A committee was formed in 2019 under direction of PM Khan to determine the real reasons for high cost of electricity and circular debt. The report was compiled in April 2020. Although the report covered a wide landscape, media zeroed in on one aspect only that was the independent power producers (IPPs). For the record, the report is a 296 page exhaustive study.

The committee had suggested a number of steps, basically focusing on systematic inefficiencies that will lead to capping the leaks for good. However, ignoring the suggestions of firefighting, focusing on cause of ill and its cure and long term strategy all of which are detailed in a comprehensive series of plans (Reference: “Report on the Power Sector: Committee for Power Sector Audit, Circular Debt Resolution & Future Roadmap”), the news to shift the burden on the consumers while ignoring the need to correct the wrongs is shocking.

This approach of superficial awareness of issues by those responsible to ‘fix’ issues either because of conflict of interests or being novices at the job has within it the potential to destroy whatever is left of the economy.

Let us illustrate with one example only. In April 2020, construction sector had been raised to the level of industry. Incentives for investors and businessmen were announced including that “the people investing in the construction sector this year will not be questioned about their source of income.” Yet the sector is lull. There is hardly if any buy or sell. First, the consumer buying power is low compared to increased cost of construction. For example 5 marla houses in DHA area of Lahore, sectors like Shuhada Town Phase 9 with small plots and houses built sold like hot cakes. Their market is: those working abroad at lower positions or/and wanting to invest in smaller plots/houses the cost of which always traditionally appreciated. Second were those who wanted set ups for families while living in nearby areas like Sialkot, Gujranwala for families live-in as their children studied in Lahore. Third were people wanting to move upscale from other areas of Lahore. Reportedly there are around 80 houses built and waiting for sale for past 7 months to a year. Without buyers. People are tight fisted about their money. There is no future security and no one is willing to invest.

With high electricity adding on 30% as suggested by our stalwarts the cost of production of everything will be hit hard.

The reaction of people dying of hunger and wants unfulfilled cannot be predicted. Already there are reports of thefts and dacoities of well-spoken young men taking place. One does not need to think long for the reason.

It seems highly unlikely that the government will deliver in next three years. It lacks the team that has the understanding to address issues and provide easement to the people. The question is, if things continue the way they are continuing, what will happen economically with Pakistan in the next three years?

The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: yasmeenali62@gmail.com and tweets at @yasmeen_9