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Up the creek?
SELDOM before in the past few decades have I heard Pakistanis — friends, students, colleagues, acquaintances and even strangers — sound so despondent and negative about the future of the country as I have over the last few months. The economic situation has been tough for a few years now. But the mood over the last year or so has really turned sour. And continues to be so.
The economic situation is bad. Inflation is hurting everyone. The economy is stalling, new jobs are not being created and existing jobs are being destroyed as manufacturing and even the services sector take a hit because of the slowing economy.
Much of the discussion on the economy has focused on the issue of whether or not Pakistan will default. The opposition and many others say that it will. Government officials say it won’t, and even threaten people with legal action if they spread ‘rumours’ that it will. But that is not the real issue. Given that default is being discussed, irrespective of whether it happens or not, we are clearly in a bad enough situation where the possibility has become real. The state of the economy, more than any single action or outcome, is what is hurting the people. For most citizens, the question of whether or not Pakistan defaults is a mere technicality. If inflation stays where it is, if the savings rate remains negative, if jobs are not being preserved and new ones not being created, does the issue of default or no default make a difference to the ordinary citizen?
A friend who had retired about 10-odd years ago told me recently that he has had to come out of retirement and look for work opportunities as inflation over the last few years has eroded his savings to the point where his retirement plans are no longer tenable. He realises that even though he is willing to start at a reasonable salary, much lower than the one he was drawing when he retired, finding a job at his age will be very hard. But he does not have much of an option. He has also had to tell his children that where previously he was willing to fund even their graduate studies, he can now only support them during their undergraduate course.
What is new is that even fairly well-settled business families have been moving assets out of Pakistan.
But my friend is still one of the more fortunate ones, with savings that have helped him maintain a decent lifestyle. For the majority of Pakistanis, who earn less than Rs50,000-Rs60,000 a month, the inflation of the last few years has been quite devastating. Not only is it impossible for them to save or think of retirement etc, they have had to slowly cut back on even necessary expenditure over the years. Spending on education and health have taken a hit. But these expenditures are an investment in our children’s and the country’s future. Cuts in these will hurt not only families over the next decades, but also the country and its growth prospects.
It is no wonder that a lot of people I talk to are thinking of looking for opportunities to leave Pakistan. It is not just students, but also people searching for work opportunities and looking to settle elsewhere.
But what is new here, and this I have come across recently, is that even fairly well-settled business families have been either moving assets and businesses out of Pakistan or are planning to do so. Some of the families that run the largest conglomerates in the country have also been moving people and assets. The older generation might still be here but the next generation is all settled abroad and have other citizenships. A lot of money has been moved or is in the process of being moved.
The point of mentioning all this is not to argue whether this is good or bad on the part of individuals. Individuals and families will do what they think is in their best interest. And this is as it should be. But if a lot of young people want to leave, and quite a few do, and a lot of businessmen also depart, taking most of their capital with them, it is definitely not going to be good for Pakistan in the short to medium run.
All this takes us to the issue of morale and general outlook. If people are thinking of leaving, irrespective of whether they are able to or not, they will definitely be risk averse and not invest in Pakistan. But private investment of time and resources are the most important driver of growth and development for any country. If they dry up, how can we think of sustainability and continued growth and development?
The most difficult part of this conversation is that people are getting negative about the future. Difficult times have been experienced before too, but people have always felt that the future would be better; this time the same sense about the future is not there.
People feel politicians do not have the solutions nor the will to do something. The deep state seems equally clueless. More damagingly, people feel none of these groups and other groups within the elites actually care or have the ability to do much about these things. Governance systems are broken as is the political system. So, what can one think about the future?
Instead of talking about prosecuting people who speak of the dismal state we are in or attributing every note of dissent to the doing of the opposition, the government and other powerful stakeholders would be better off showing what plans they have for addressing the current situation. At the moment, we get nothing from the government other than platitudes and rhetoric. Sharing a plan of action with viable steps would be a good start. If this does not happen now, the despondency might well increase. And with justification.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
Published in Dawn, January 6th, 2023
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