Economy Pakistan

Pakistan: Political Chaos and the Economic Decline

By Lal Khan

Seething political chaos and the judiciary’s hyperactivity have concealed Pakistan’s rampant economic deterioration. The politicians seem to have abandoned the electorate and have descended into courtroom dramas. The media’s gurus are oblivious towards the real issues tormenting the oppressed classes that are hit by the economic decline that is further destabilising the state and the society. A defunct ruling class is compelled by its predicament to overuse its sacrosanct judiciary for resolving the elite’s factional disputes. Its excessive utilisation undermines the reverence and authority imposed upon social psychology through protracted manoeuvrings of the state’s ideological apologists and connoisseurs.  The agony of existence faced by the poor and the dearth of essential necessities for human existence has become problematic, especially when paired with the media and intelligentsia.

This elusiveness of politics and intelligentsia is not without a cause. Nor is it accidental. The incumbent politicians and the experts of the system have no solutions or way out of this quagmire of the social and economic crisis of their system. Violence, crime, fear, alienation and cultural atrophy are choking Pakistan’s beleaguered society. Even if we leave aside the economy of the oppressed, conveniently but erroneously called the micro-economy, the ‘macro’ economy of the upper classes and the state is in a perilous state. Inspite of the sharp rise in growth rates after the advent of the PML (N) government in 2013 the general state of the economy is far from healthy.

Last week’s publication of The Asian Development Bank’s (ADB) annual report revealed an organic decline of the economy already in a fragile state. The current account deficit may widen to as much as $14.5 billion. The ADB also termed the Rs1.4 trillion budget deficit target as “ambitious”, suggesting that ‘it will be difficult to achieve in the prevalent political turmoil’. Pakistan will also miss its 6 percent economic growth target. The ADP has stated unambiguously that due to worsening current account deficit Pakistan’s choice is now limited to either “rapidly depreciate the currency” or increase foreign credit borrowings to finance the external debt. Reckless borrowings had already accumulated an unprecedented $83-billion external debt and liabilities by June this year.

The ADB estimates the current account deficit to reach 4.2 percent of GDP due to rising imports, declining remittances, and stagnant exports. Pakistan has already obtained almost twenty bailout packages from the International Monetary Fund to correct these macroeconomic imbalances. The share of exports in GDP nearly halved from 13 percent in 2006 to a dismal 7.1 percent by the end of the fiscal year 2016-17. Exports fell annually by 2.5 percent on average in the last ten years. Forex reserves have fallen to $14.2 billion. The repayments of the debt and interest of the Chinese companies and banks under the investments in the CPEC projects will further increase the debt to GDP ratio that has already shot up to 71 percent of the GDP. The report concluded, “Growth has improved, but the government needs to address fiscal and external sector vulnerabilities that have reappeared with the wider current account deficit, falling foreign exchange reserves, rising debt obligations, and consequently greater external financing needs… political uncertainty heightened following the Supreme Court’s decision to disqualify the Prime Minister elected in 2013, may hamper growth prospects.”

The main cause of the political turmoil and controversial judicial verdicts that are depreciating the state institutions are the result of the burgeoning economic crisis. The increasing lust for ‘more’ by a corrupt and reactionary ruling class represented by the incumbent politics and protected by the state exacerbates the crisis. However, the ADP report conveniently ignores another crucial factor, the parallel or the black economy that has grown larger in size than the country’s formal economy, and also plays a crucial role in politics and state manoeuvrings. It employs more than 70 percent of the workforce and runs services, real estate and many other sectors of the economy. The state has been retrogressively abandoning the social welfare and human development sectors since the 1980s. One reason was the lucrative profitability in social infrastructure and welfare sectors such as health and education. The increasing deficits and debilitation of the state’s finances also led to the state’s desertion of these basic provisions of society.

The paradox is that the mainstream political parties hardly differ in their economic policies. The ‘opposition’ parties will vehemently use this ADP report to further malign PML (N) regime. But the reality is that they also have the same recipes of ‘direct foreign investment’, privatisation, deregulation and restructuring. Anti-workers restructuring of employment from permanent jobs with pensions and other benefits into contract labour with no benefits and job security. The direct foreign investments of ‘western or eastern’ imperialist companies seek greater profits, contract labour, and capital-intensive technological investments that hardly generate any jobs. Pakistani rulers ‘incentives’ mean even more economic adversities for workers. With higher growth rates the social development, living conditions and poverty alleviation are inversely affected. During the years of high growth rates, worsening of life conditions reflect the diseased nature of Pakistan’s capitalism.

Literacy rates have fallen and the access to health facilities and scientific treatment has shrunk. The privatisation of crucial social necessities for human existence have become unaffordable with falling incomes and soaring expenditures. This process is irreversible within the incumbent socio-economic system. The irony is that most of the bourgeois politicians are vociferously raising the slogan of changing the ‘system’. However, by the system they only mean the government, or the method of governance within the prevalent order. One cursory look at the prospects of Pakistan’s capitalist economy from a scientific perspective decidedly exhibits this systems total failure to provide human needs, develop society and beget prosperity for the vast majority of its inhabitants: the toilers, the oppressed and the poor.  The social asphyxiation, economic disparities and alienation foster extremist mind-sets that nudge the youth into notions of quixotic grandeur leading to terrorist havoc. Only by transforming the basic socioeconomic system breeding this turbulence can society be liberated from this harrowing drudgery and devastation. Karl Marx concluded long years ago: “Philosophers have only interpreted the world; the point is to change it!”