With the world facing unprecedented challenges, official policymaking is now confronted with some baffling questions. What kind of economic recovery will the traditional structural reforms with Covid-19-related adjustments deliver? Will it be fragile or robust, inclusive or not, sustainable or sort term?

These issues are now under the global spotlight and at the centre of a public debate as highlighted by the media. Apparently, the world is standing at a crossroads. The fear is that a wrong choice in policymaking could lead to a dead end.

To quote from a recent article by Editor-in-Chief, The Economist, Zanny Minton Beddoes, US President Joe Biden is “focused on repairing yesterday’s world rather than build tomorrow’s.”

Fortunately, economics is gradually shedding its orthodoxy as it is primarily responsible for the current global crisis, worsened by Covid-19, and is regaining its organic function as a social science.

What is encouraging in the case of Pakistan is that Prime Minister Imran Khan was voted to power on the pledge to build a Naya Pakistan. The voters included youth inspired by the global movement to forge a more equitable alternative world. This is the second attempt of this kind. Earlier, Zulfiqar Ali Bhutto tried to erect the edifice of a new Pakistan after the 1971 tragedy. He himself wrote from his death cell that the 1973 constitution was his greatest achievement.

The deep-seated problem of rising poverty and surging inequality has roots in the emerging market economy model evolved more by external input and less by domestic intellectual inputs

Unable to empower those who wanted change to better their lot, the prime minister is stuck with the regressive status quo. No doubt, with the support of the central bank, the PTI government has managed an early recovery by extending enormous fiscal stimulus to firms and some relief to households. The private sector borrowings have shot up by 80.5 per cent to Rs352 billion in eight months of the fiscal year, up from Rs195bn during the same period in 2019-20. Total private borrowings crossed Rs1 trillion over eight months but were much lower than the banks’ investment in long-term Pakistan Investment Bonds of Rs14.102tr with a rise of Rs1.216tr in government debt during the first half of this fiscal year.

Several decades’ old problems such as the export-import gap, current account deficit, surging foreign debt, revenue-expenditure divergence and fiscal imbalance remain serious concerns. The improved initial performance of these sectors does not represent a long-term stable trend. For example, the Active Taxpayers List 2021 issued by the Federal Board of Revenue on March 2 shows that the number of active taxpayers (individuals and companies) has fallen by 935,000 to 2.178m in the tax year 2020.

Sustainable and inclusive growth seems elusive. We hear a lot that an increase in tax revenue is imperative for expanding government spending for the uplift of have-nots. However, an enormous share of the tax collection and even a significant part of foreign debt goes to subsidise production and exports. If withholding taxes, an indirect tax collected in the garb of direct taxes, is excluded, close to 90pc of the total revenue is collected through indirect taxes, placing a disproportionate burden on common citizens.

It cannot be denied that Mr Khan has made serious efforts to widen the social safety nets for the poor and vulnerable helped by multilateral lending and debt relief provided by bilateral lenders. But this is not enough and no substitute for decent jobs with fair wages. The deep-seated problem of rising poverty and surging inequality has roots in the emerging market economy model evolved more by external input and less by domestic intellectual inputs.

So what Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, says about the United States is also relevant to Pakistan. He is of the view that America has developed a new consensus: ‘socialism for the rich and capitalism for the rest.’ Sharma notes that this happens when government intervention does more to stimulate the financial markets than the real economy.

Referring to the electricity crisis in Texas, eminent journalist Thomas L Friedman wrote recently in the New York Times: “the country used to dream big. Now it is increasingly thinking short-term.” He described the crisis as a case of ‘privatise the gains and socialise the losses.’ Pakistan faces a similar situation.

Owing to an uneven performance of various sectors and ballooning income inequality, one has witnessed lacklustre progress in implementing PTI’s flagship low-cost housing programme despite multi-faceted stimulus provided to builders and developers. According to a State Bank of Pakistan official, around 10,000 (loan) applications’ have been received so far but loan disbursement is a bit slow amounting to a few hundred million rupees.

The avenues for regional cooperation and trade are restricted by armed conflict in Afghanistan, Pakistan’s gateway to central Asia, US sanctions against Iran and Indo-Pakistan tensions. The good news is that Pakistan and India have now recommitted themselves to 2003 ceasefire arrangements.

Published in Dawn, The Business and Finance Weekly, , March 8th, 2021