The economic impact of PTI’s protest in Islamabad, coupled with administrative measures to limit participation, counter its message, disperse the crowd, and clear the venue, extends beyond the huge financial toll, estimated at Rs950 billion, on the country.

The projected losses, amounting to Rs190bn per day over five days, are attributed to disruptions to transport, supply chains, and economic activity caused by the recent crisis, as cited by Finance Minister Muhammad Aurangzeb in a press conference last week. This figure includes the opportunity cost of lost economic activity during the chaotic period, along with setbacks to stabilisation efforts due to increased security expenditure, reduced tax revenues, and lower export earnings. The negative impact on the information technology and tech sectors was particularly significant.

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Mr Aurangzeb disclosed that the Ministry of Finance has prepared a comprehensive report assessing the daily economic losses caused by the disruptions across key sectors. The report estimates that Pakistan’s GDP suffers a daily hit of Rs144bn, with missed export opportunities amounting to Rs26bn per day.

Foreign direct investment inflows may drop by Rs3bn daily. Additionally, the agriculture and industrial sectors face daily losses of Rs26bn and Rs20bn respectively, deepening economic strain. The report couldn’t, however, be accessed despite efforts.

‘Unless investors witness consensus among the country’s power centres, business sentiments will remain clouded’

The disruption from Nov 22-26, coupled with the government’s stern tone afterwards, failed to instill confidence in the business community or assure a smooth path forward. This unease persists despite visible improvements in macroeconomic indicators following a precarious period when the country narrowly avoided default.

Prime Minister Shehbaz Sharif projected the stellar performance of the capital market as a vote of investor confidence in the government and its economic policies. However, some analysts and business leaders view it differently. “The sharp rise of the KSE-100 index, which surpassed the 100,000-point mark last week, also reflects investors’ preference for short-term opportunities over long-term ventures in key sectors like industry, agriculture, or services.

“To channel local capital into investments with stronger backward and forward linkages and greater multiplier effect, the government must address trust-related issues,” observed a prominent textile magnet, speaking off the record.

Several business community representatives, wary of provoking backlash on social media or offending the power elite with their remarks, either declined to comment or spoke privately.

“The boom-and-bust cycles of the past have underscored to the business community that political stability is essential for achieving and sustaining economic recovery, as well as for driving growth and development.

“Closing the current account and trade gaps is commendable, but as long as a trust deficit persists regarding the government’s intent and capacity, significant investment is unlikely, no matter how many MoUs [Memorandums of Understanding] the government signs. Foreign investors rarely enter overseas markets blindly; they often follow the lead of local investors,” noted an analyst.

“Both the protests and the government’s response dealt a hard blow to emerging optimism within business circles. While strong macroeconomic indicators are essential, they are not sufficient to mobilise investment,” commented a former head of an apex trade body.

“The events of the past week have once again highlighted high risks of committing capital in a country where the political class lacks foresight, institutions are fragile, and systems are dysfunctional. Undoing the damage and restoring confidence may require sustained and focused efforts over an extended period,” he added.

Pro-government industrialists expressed concern over strong arm tactics deployed but were happy over the end of the mayhem in the country’s capital before obstructions in mobility cause serious shortages of necessities across Pakistan and aggravate problems for people and businesses.

Chaudhry Muhammad Saeed, former president of the Federation of Pakistan Chamber of Commerce and Industry, expressed hope for a peaceful settlement of the current impasse. “A revised Charter of Democracy involving all political parties could be a viable path forward,” he advised.

Majyd Aziz, former president of the Karachi Chamber and Employers Federation, criticised the opposition’s rigid confrontational approach and the government’s heavy-handed tactics to suppress public protests. He also emphasised the importance of a negotiated settlement.

Furthermore, Mr Aziz expressed disappointment over the business community’s passivity during such critical moments. “The business community has a significant stake in the country’s future. It must clearly articulate its stance and press the government to swiftly resolve the situation, ensuring an environment conducive to investment and long-term stability,” he urged.

Hasan Bakshi, a leading property developer, emphasised the need for a pragmatic approach grounded in the country’s realities. “All key stakeholders, including the government, opposition, security establishment and judiciary, must come together to chart a viable way forward,” he urged. “Unless investors witness some level of consensus among the country’s power centres, business sentiments will remain clouded, despite low interest rates, controlled inflation, improvement in the twin deficits, and IMF’s [International Monetary Fund] support,” he noted.

Published in Dawn, The Business and Finance Weekly, December 2nd, 2024