A YEAR ago, a number of economists warned about the impending disaster which the PTI government was bringing to the country. The signs were clearly evident; the poor decision-making, ineptitude and hubris were all suggesting just how bad things were becoming and the delay in taking critical decisions was making things much worse.

An economy which had seen consistently high rates of growth, with per capita income and employment rising for almost a decade, was headed towards a huge wreck. After the 2018 elections, some economists had argued that whoever won, they would need to go to the IMF almost immediately and address the balance of payments and exchange rate problems which were indicating serious trouble ahead. The 10-month delay in going to the IMF caused by the PTI government made matters far worse than they would have been had this decision been taken several months earlier.

Today, we suffer both, the policies imposed by the IMF at the behest of the ruling clique, and the consequences of delayed decisions. The conditions imposed by the IMF have had to become much harsher on account of the extended delay in addressing the issues which needed urgent attention. Had the government got off its high horse and confronted the eventuality in August 2018 rather than in May 2019, the economy would not have deteriorated as much as it did due to procrastination, and the economic team might have been in a stronger position to negotiate with the IMF. With a wrecked economy, the IMF was in a dominating position to tighten every screw. It was the PTI’s economic managers themselves who had got them into this bind in the first place.

First wreck the economy, then its people...

One year of suffocating austerity has made sure that after destroying the economy, this government, as a consequence, has now destroyed the real economy, which affects the lives of the working people and the dispossessed. While the government consistently celebrates the fact that it has drastically lowered the current account deficit — which, indeed, it has — there is not a single economic indicator which matters to the lives of the people which they can claim to have improved. In fact, every single indicator which affects the lives of the working people in Pakistan, is in a dismal state, perhaps the worst in over a decade and is likely to deteriorate much further.

Inflation is at 14.5 per cent, the highest in over a decade. The even more troubling sign is that food inflation is more than an astonishing 25pc. Even those who still have a job are struggling with rising prices and anecdotal evidence across Pakistan suggests that many families have had to make extreme sacrifices in making ends meet. Stories of children having to be taken out of school and health and medical visits and expenditure being curtailed, while not sufficiently documented, if true, suggest a trend for the near future which will have serious consequences. The health and education gains over the last decade, especially for girls and women, are probably already lost.

With the manufacturing industry contracting for eight straight months with closures in the automobile and related industries now a regular feature, the contagion of an economic slowdown is clearly evident, with agricultural growth now also falling. The GDP growth forecast for the current fiscal year continues to be downgraded, and there are few signs it will get to anywhere near 2.2pc, the lowest again, in a decade. In fact, economist Hafiz Pasha has calculated an even lower figure and suggests that the GDP rate this fiscal year will be only 1.2pc and 22 million would have become unemployed in the first two years of the PTI government.

The recent crises in the shortages of tomatoes and flour are also an indication of utter mismanagement by the ruling clique, and with more such crises just waiting to happen, one can expect people to pay the price, literally, for incompetence and the indifference articulated so clearly in public statements by government ministers. The prime minister’s ‘mafias’ are simply another name for crony capitalists.

With interest rates at their highest in a decade, utility prices consistently on the rise, and economic production slowing down, it is not surprising that the government can (only) celebrate a lowering of the current account deficit. When there is no economic activity, there will be little to import. Moreover, when there is slowing economic and business investment and activity, when households are forced to curtail consumption, targets to generate increased revenue will always be unachievable. The IMF needs to understand this too rather than berate the government for not meeting its targets.

The PTI government has had no economic policy since it went to the IMF as it hasn’t needed one. Its economic policy has simply been IMF agreements running on autopilot. Do what the IMF says, and sit back and watch the current account improve. The evidence over the last 10 months supports this suggestion. Beyond raising interest and utility rates and devaluing the rupee, the government hasn’t really done much in the realm of economic policy. ‘Development’ does not seem to be a term associated with the PTI government’s economic programme.

Given the absence of any creative thinking in economic policy by this government, one can only expect more of the same. This means more IMF subservience, a lack of concern with how the working people and those who are added to the category of the poor, will survive many more months of austerity, and an economic slowdown which will continue to wreck the lives of millions of Pakistanis.

A government not fully accountable to the electorate and beholden to other power centres doesn’t need to undertake development for the people, nor does it need to make their lives liveable. If the PTI government had been on the ‘same page’ as the dispossessed and working people, we would have seen a very different economic outcome.

The writer is a political economist.

Published in Dawn, February 11th, 2020