By Fareeha Qayoom
Year 2008 has been tough for Pakistan. In the immortal words of Shahzad Roy’s famous song, ‘Lagaa Reh,’ Pakistan is passing through a critical curve, (Pakistan aik Nazuk more say guzer raha hai). Pakistan went through elections, resignation of Gen. (Retd) Musharraf and election of President Zardari, power cuts, food shortages, Judicial crisis, FATA and US interference, economic crisis, (rising inflation, depreciating rupee, falling exports and rising imports, falling dollar reserves and foreign exchange remittances, more taxes and higher cost of living including rising fuel and power prices), worsening law and order situation, (bombings and killings) and natural disasters (earthquake).
This was in addition to what was happening in the world. The world saw no cessation in manmade tragedy (wars and bombings) and natural disasters (tornados, cyclones and hurricanes, earthquakes and floods). The global economy saw a real estate mortgage (sub-prime) meltdown that started in USA travelling all the way down to other financial capitals of the world including Europe and Asia – Pakistan real estate business also suffered a crisis of faith. According to real estate pundits it was entirely due to neglect and mismanagement of domestic economy by the economic managers of Pakistan. The world also saw a meltdown and bailout of global banking sector, witnessing the downside of globalization. Pakistan in turn suffered because of this particular financial crunch since our so-called allies left us in the lurch pushing us towards the controversial and heavily penalizing IMF bail-out with its track record of belt-tightening and other domestically unpopular measures – in the meantime, the citizens of Pakistan are waiting for the other shoe to drop (since the year hasn’t ended yet, still two months to go as we go into print!) Let’s see, Year 2009 will bring more direct and indirect taxes and higher cost of living – 40 percent higher utility bills are just the tip of the iceberg! (:
The foreign press in the meantime is having a field day with our economic plight, according to Bloomberg for example, “Pakistan, perceived as the world’s riskiest borrower, may seek the help of the International Monetary Fund to avoid default on its debt obligations, said Shaukat Tarin, financial adviser to the prime minister. The South Asian country may need as much as $6 billion to shore up its foreign-currency reserves after they dwindled more than 74 percent in the past year to about $4.3 billion. Pakistan has $3 billion in debt servicing costs in the coming year. Standard & Poor’s, doubting the nation’s ability to repay debt, cut the long-term foreign-currency rating on Oct. 6 to seven levels below investment grade, and said it may lower it again.”
According to ANI news report dated Oct 18th, “despite Pakistan receiving enough pledges from donors to avoid a possible economic default, the US media continues to predict an impending economic collapse in the recession-hit country. Only a day ago, an excerpt of a draft report being prepared by the US intelligence agencies said that Pakistan economy was on the edge, having no money, no energy, and no government. About half a dozen reports published in the US and Western media on Friday blamed political turmoil, rising inflation, increase in oil and fuel prices and power shortages for derailing the Pakistani economy.” According to one ADB document on Pakistan, “growth in FY2009 is expected to remain subdued at 4.5 percent, with a continued slowdown in commodity-producing sectors. Domestic spending will have to rise less than output for the current account deficit to shrink. In these circumstances, export growth becomes crucial, as it will help make the current adjustment less painful. The faster the growth in exports the smaller the reduction in growth required to close the deficit.”
Unfortunately, due to economic slowdown of the world, our favorite export markets will also stop spending as much as they do on imports. Foreign exchange remittances will also fall as the prosperity of overseas Pakistanis might also decline with their declining economies. 2009 will be another tough year in my estimation because with all this gloom and doom news and slowing economy, local consumers will only tighten their belts more which in turn will decrease the prosperity of domestic retailers, FMCG vendors, hotels, restaurants and cafés, local businesses, importers and industrialists. The only people who can make some money in this economy are the farmers and only if they play their cards right by growing enough food and cash crops to make a decent dent in our balance of payments by exporting the surpluses. We probably will still import important staples because we are not even managing our agriculture sector right which is the backbone of our economy. Textiles and manufacturing industries were already losing out in the global economy after WTO came into effect. Poor skill set means we were only competing in the lower end of the dollar values, now with the addition of frequent power cuts and high utility bills we have been priced out of the market with China and India completely taking over our traditional markets. Since our economic managers can’t do anything to change this situation, Pakistan as usual is in God’s hands. Fortunately for us, God runs a better economy than our government so yes, things are bound to get better eventually. “Sab kuch Allah par chor do,” as Shahzad Roy says. Pick your attitude – as they say, the pessimist sees difficulty in every opportunity and the optimist sees the opportunity in every difficulty. For my part, I think we all just have to be patient and wait for the next critical curve to hit us- That can only happen if this one is over!(:
This article was originally published in the print edition of Valuemag, January 2009, issue 7, under the section, ‘
From the editor’s desk… January 2009, (December 2008/January 2009)’