2021: Bleak Outlook

2021: Bleak Outlook
The criminal mismanagement by the PTI government, coupled with the severe disruption in everyday life wrought by Covid-19, has made for a bleak economic and political outlook for 2021. Some urgent areas of concern may be noted.

Covid-19: Although various vaccines will become available later in the year, lack of sufficient government funding and private sector profiteering will put them out of reach of most Pakistanis. Therefore, the Covid infection is likely to persist in clusters and spikes, negatively impacting health, education, transport and economic services.

Economy: Since the global food chain has been disrupted by Covid-19 and trade with India will remain suspended, blocking quick imports to plug shortages, we should expect recurring shortfalls of select food items with resultant price hikes.

Despite government propaganda of signs of economic recovery, the general depressed state of the economy is not likely to improve sufficiently to make the lives of lay citizens more secure and better. GDP growth is forecast at about 2% under optimistic assumptions. This means that unimpeded population growth and rural-urban migration will feed into the pool of joblessness or disguised unemployment, aggravating social tensions, criminality and economic distress.

The government’s rising and costly indebtedness will also impose severe constraints on its willingness or ability to inject life into the economy. Owing to low GDP growth and persistence of a negative tax-collection and paying culture, the resource crunch will continue and manifest in revisions and shortfalls in tax collection. This will negatively impact public sector development spending and poverty alleviation programs.

IMF conditionalities will impose new hardships. Loss-making public sector enterprises will be forced to shed workers and government will have to handshake significant layoffs. Scores of tax exemptions and benefits to trade and industry will have to end, leading to closures and protests by business lobbies. Privatisation will not take off in any significant manner because of bureaucratic and legal hurdles in restructuring entities for sale, the fear of unbridled and unaccountable NAB scrutiny being a significant dampening factor. Indeed, except for short-term hot money attracted by significantly higher than average global interest rates, foreign investment is not likely to rush into the country and revive growth. Nor are overseas Pakistanis about to heed Imran Khan’s call to invest in the home country, lack of belief and trust in the PTI government’s longevity, efficiency, credibility and stability being important adverse factors. This means the circular debt will persist and mount, leading to periodic crises in various sectors where supply chains are liable to be disrupted, especially in the power sector. CPEC investments by China have already stalled and new ones are confined to ceremonial ribbon cuttings.

The much touted reduction in the current account deficit – owing largely to falling imports because of rupee devaluation and international supply chain disruptions rather than any significant increase in exports – will certainly be good for exchange rate stability and State Bank of Pakistan forex reserves. But this is a perverse windfall that has no positive bearing on the lives of ordinary citizens. If anything, it contributes to double digit inflationary pressures in the economy.

Pakistan’s Foreign Policy options will not improve next year. India will remain in a hostile posture and the threat of a sharp but limited conflict will hang over the sub-continent while Indian-inspired terrorism in Pakistan continues unabated. Afghanistan will also remain in the throes of civil conflict and there will be no peace dividend for Pakistan. Indeed, if the Taliban continue to slowly wrest power from the Ghani administration, as is likely, the flow of Afghan refugees into Pakistan may increase, aggravating conflict in the borderlands. A lingering interest in securing Pakistan’s assistance in negotiating an end-game in Afghanistan will not change the way America under President Biden will incline to see Pakistan through the prism of Washington’s strategic partnership with India aimed at securing access to the Indian market and its China-containment policy. Pakistan’s isolation in the Middle East because of a falling out with the leader of the OIC, Saudi Arabia, will diminish its access and economic prospects, notably in the export of manpower and resultant home remittances. The recent spurt in remittances is likely to be short lived because it is mainly due to increased pressure for more funds to sustain families back home crippled by the adverse consequences of Covid-19.

Political Instability: The coming clash between the government and opposition is not likely to be averted either because of state repression or because of differing opposition-parties’ interests. Even if the long march and resignations route to overthrowing the PTI government fails, there will be no political stability in the country. Since neither the economy nor the government’s U-Turn economic mismanagement is likely to improve, the popular groundswell for a change will persist, providing sufficient discontent to fuel the opposition’s agitation. Indeed, any continuation of the opposition policy of direct political targeting of the Miltablishment for the faults of the PTI government will likely effect a change of tack in its support of Imran Khan, thereby opening up political options for accommodating a broader national perspective.

Najam Aziz Sethi is a Pakistani journalist, businessman who is also the founder of The Friday Times and Vanguard Books. Previously, as an administrator, he served as Chairman of Pakistan Cricket Board, caretaker Federal Minister of Pakistan and Chief Minister of Punjab, Pakistan.