Economy under political stress
THE Supreme Court has sent Prime Minister Yousuf Raza Gilani packing, sparking off a fresh political turmoil. However, the key political players have adhered to parliamentary norms to wriggle out of the crisis.
The readjustments of current proportions in the system, however, scare businesses, mellow their ambitions and drag the economic activity to sub-normal level. The corporate sector dreads political instability, more so, when the economy is under severe stress.
The business community is peculiar in its ways. It rejoiced the blow to Pakistan Peoples Party (PPP) -led coalition government despite the shadow it casts on sustainability of the democratic order. It was said to be disappointed with the PPP as the country moves slowly towards resolution of the crisis within the constitutional framework.
The representatives of trade bodies, in their initial reaction, are reported to have expressed a sense of relief at the PM’s exit.
Some market analysts, however, defended the position of the private sector. “The view does not emanate from likes and dislikes.
It is based on their experience. The business had very tough four years. Take security, energy, fiscal mismanagement, corruption, etc. The list is long. The government did not meet the expectations of the community in terms of policy options or its management”, Sayem Ali, country economist at Standard Chartered Bank, commented.
“Besides respect for rule of law and its impartial application for all is seen as a ‘big positive’ by businesses. To them it is an indication of structural improvement in the environment that will infuse confidence in the investor community”, he argued.
A senior economist from Islamabad expressed frustration over the mindset of business leaders. “What a business community?
This is a bunch of rent seekers without any attributes of an entrepreneur. Give me one example of innovative product or business idea. They like making money whatever the cost without risking a penny of their own”, he said.
“They want cheap gas, free electricity, concessions and subsidies. They do not care if the country is going to dogs. Yes, a dictatorial regime pampers them more to serve its interests and subjugate the masses. They dislike elected government not for its failings but for its strengths”, he argued.
“I agree that the government should have delivered but it is them and their lobbies in media and parliament who blocked any and every effort to promote competition and competitiveness, the only sustainable path to growth and development. It is people, consumers, you and me who suffer because of this culture of patronisation”, he added.
Another economist, who again was not too convinced of big business skills, lamented the community’s lack of action in the current difficult phase of the economy.
“Yes, there are problems but urban elite has resources to turn around structural difficulties into business opportunities. The
country has given them so much. I do not see why can’t they plough a portion of the amassed wealth in deficient sectors like energy”, he said.
“ If the foreign investor is shy, the local investors should have come. Instead they moved their money out of Pakistan to invest elsewhere even if it was riskier”, he lamented. “So much for their patriotism”, he mocked.
With politics dominating public discourse in an election year, the chances of economic challenges facing the wobbly economy grabbing the government’s undivided attention are remote.
Besides, the decision of the Supreme Court effective from April 26 brings the whole exercise of the budget-making and its passage by the National Assembly in question. Some suggest that post-April decisions of the Gilani government can be validated by the President through an ordinance.
Some economic experts warned of weakening external sector leading to hard landing of the economy. The foreign exchange reserves have depleted because of IMF loan repayments and financing of the ballooning import bill.
The rising twin deficits—fiscal and trade—and petering out dollar inflows from development partners in a period of low growth have weakened the country’s currency. The rupee has continuously been losing value.
Last week the State Bank reported foreign exchange reserves at $15 billion, some $371 million less than a week earlier. The rupee lost about four per cent in value against dollar during the current month and was said to be trading at Rs95.30(buying) and Rs95.70 (selling) to a dollar in the open market.
“Yes, the situation will discourage new foreign investment but companies already in Pakistan take things in their stride. I do not see them changing their expansion plans if the prime minister changes. Actually, because of elections the hidden wealth will surface and generate demand that businesses capitalise on”, Humayun Bashir, President of the Overseas Chamber of Commerce and Industry, commented off-hand.
“I hope better sense prevails to collectively resist attempts to derail the system. I believe the situation is a sad commentary on short sightedness and lack of commitment to change life of ordinary people for the better”, Farooq Rehmatullah, a respected professional, commented.