Monday, August 15 2022

Changing geopolitics
As we celebrate the completion of 75 years of freedom, the time is ripe for choosing a wiser course of action for future economic development. Historically, foreign aid played an important role in Pakistan’s economic development in the 1960s and 1970s. During this period, the country made a massive investment in physical infrastructure, electric power and irrigation projects with the help of foreign aid. Mega projects such as Tarbela and Mangla dams were constructed during this period. Foreign aid during these two decades, mixed with domestic private and public investment, enabled Pakistan to undertake crucial public sector projects including the construction of road networks, electric power generation, construction of the Indus Superhighway and the establishment of Pakistan Steel Mills. These and other similar projects were launched during the governments of General Ayub Khan and Zulfiqar Ali Bhutto.
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A lamentable tale of neglect
As the nation celebrates 75 years of independence, Pakistani people and businesses continue to strive for freedom from want/fear/nepotism and liberty to compete, to choose, to access economic opportunities, to trade and to a fair deal. Looking back may not necessarily be a pleasant exercise for informed Pakistanis especially when neighbouring China overcame bigger challenges to reach where it is today over the same period and many others did relatively far better. Sadly, the demands of the current ongoing crises have also been draining and did little to lift spirits this year. Movers and shakers approached for their input, however, put up a brave face expressing hope. They suggested reforms, continuity, inclusivity and rigorous planning. They argue that with some tweaking in the system, Pakistan has the potential to make up for the lost time and take a leap into the future, provided the nation collectively decides to focus on the future and its demands.
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Optimism over IMF tranche keeps stock market bullish
The three-day week on the stock exchange commenced on a positive note last Wednesday amid optimism over the disbursement of loan tranche from the International Monetary Fund (IMF) in the coming weeks. Arif Habib Ltd said the materialisation of the $1.18 billion loan tranche will pave the way for further loans and investments from friendly countries and international financial institutions. Moreover, the rupee strengthened again in the outgoing week against the greenback and appreciated by 8.55 or 3.82 per cent from a week ago to close at 215.49. In addition, investors’ confidence improved after Pakistan received a letter of intent to the IMF, indicating the disbursement of the tranche for the combined seventh and eighth reviews. As a result, the benchmark index of the stock market closed at 42,858 points, registering a net gain of 761 points or 1.8pc on a week-on-week basis. Sector-wise, positive contributions came from banks (224 points), exploration and production (205 points), power (84 points), automobile assembling (55 points) and oil and gas marketing (53 points). Sectors that contributed negatively were cement (23 points) and tobacco (15 points).
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The paths not taken
Of the three countries that were once a single entity, Pakistan seems to have fallen way behind. With all its posturing, waving of the green flag, shouts of ‘Pakistan Zindabad’, it cannot fudge the historic numbers that blatantly tell the story of economic and political turmoil that led to neither growth nor human development. Without an excuse for its inept management, Pakistan lags behind India and Bangladesh in most indicators. After independence, remnants of Pakistan’s colonial heritage lingered for the rupee that remained linked to the pound sterling till September 1971, according to the State Bank. Given the bungee dive that the rupee has taken of late, a time when the PKR remained constant for years seems like the golden period. It wasn’t. In 1949, the Bank of England devalued the pound sterling relative to the rupee, leading India to follow suit. By keeping the exchange rate constant, Pakistan’s exports were expensive relative to its competitors in its main market at the time of independence: India. An archived New York Times article of August 1, 1955, states that the Pakistan Government reduced the value of the rupee by one-third in a day, bringing it down to the same rate as India in hopes of boosting exports. An effort that was too little too late.
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A disappointing trajectory
At 75, Pakistan — in the words of the International Monetary Fund (IMF) — is at a ‘challenging economic juncture’. No wonder most Pakistanis today are poor, hungry and angry. The nation of 220 million people is ranked 154th among 189 countries and territories by the United Nations Development Programme Human Development Index. It is at the bottom of the list of South Asian countries, including Iran, and just above war-ravaged Afghanistan. Iran, facing decades of international sanctions, has invested much more in its people to rank at 70th position on the index. The index is a summary measure of average achievements in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living. Pakistan’s ranking on it is a reflection of the national policy choices its ruling classes have made over the last three-quarters of a century. It also shows that the country’s economic performance has been underwhelming compared to most other regional nations. Even in years of growth when the economy expanded by an average of 6 per cent between 1960 and 1990, governments did not invest in human development.
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