Atif Mian: Politicians play politics while Pakistan ‘economically burns’, criticizes PTI economic decisions
Atif Mian tweeted that when PTI came to power, it had a chance to set things right, and most important issue was (and is) to get the external account balanced. But it lacked any direction or purpose. For example, it started with its flagship ‘Naya Housing’ program.
By: Fahad Ahmed
Internationally acclaimed economist Atif Mian said that when PTI won, and had to face a currency crisis in its early months that was essentially PMLN’s fault. This time PTI returned the favor. And it has happened many times before e.g. Musharraf regime’s dying months. “The politicians play politics while Pakistan burns,” he added. Atif Mian tweeted that when PTI came to power, it had a chance to set things right, and most important issue was (and is) to get the external account balanced. But it lacked any direction or purpose. For example, it started with its flagship ‘Naya Housing’ program. “Then came Covid-19. Ironically, corona helped Pakistan breathe a little easier. This is a point not commonly appreciated, so I’ll explain it a bit more.” As per Baaghi TV report, Atif highlighted one core problem Pakistan faces is that its economy is fundamentally unbalanced.
He explained the reasons.
“A rise in domestic demand puts more pressure on external account on the margin. Covid actually helped take the pressure off external demand. People weren’t driving as much, the rich weren’t flying and so on. The result was a temporary current account surplus. It was temporary though, and deeper structure imbalance was just waiting to whiplash the economy once Covid receded.” “You can see that by coming Pakistan’s swing in current account with that of its peers. It Pakistan’s government had put in place a serious set of people in charge, such analysis would have been routine.” “Anyways, as soon as Covid started to recede, Pakistan’s balance of payment started to worsen,” he explained the reasons how COVID-19 era came with a respite for country’s economic woes. It is important to understand that the dynamics were quite negative even before the Russian oil shock hit, the oil shock and PTI’s response it only hastened the fall. “I don’t care about politics, certainly not the partisan kind but it’s important for the people to get the economics right, so we can diagnose the problem with a clear mind.” “Of course PMLN and PPP governments of the past have major contribution to the problems country faces today as well e.g. when CPEC was being put forwarded, I highlighted why it was ill-designed.” Atif questioned there could have been a really fruitful China-Pakistan cooperation but CPEC was poorly designed. How could a country like Pakistan put on such huge foreign liabilities, essentially to fund domestic consumption? “The math never added up, and the sad reality is Pakistan government never did the math (I know because I asked). Anyways, one could keep going. But I want to now bring the conversation back to the present.”
What is needed?
“We can talk about what steps need to be taken, but my fear is that the politics is fundamentally breaking down. The toughest challenge Pakistan faces is bringing back some modicum of credibility—credibility with investors, credibility with its own people. “There has to be some minimum set of rules that everyone – the main parties, and the “establishment” will legitimately agree on. “It is hard to see what that minimum core will be because they are too eager to pull the carpet from underneath each other. “Just take the example of how each government has used very limited external borrowing space as a political tool, to ultimately lead the country to the precipice it’s on today. This obviously cannot go on, with the people suffering even more than they already have.” Atif said that Pakistan needs a political grand bargain. It needs to find that common space that every functioning society needs. That political bargain must have at least two components to make any difference. First, the political elite have to agree to stop using the ‘religion card’. “You all know what it means. Stop using it, if you care about your own future,” he argued. “Second, the elite capture of economy is particularly pernicious and unproductive in the case of Pakistan. Pakistan stands out in how poorly its median citizen fares on basic needs such as education and health, even when compared to countries with similar income per capita,” he explained. “The powerful are knee deep in unproductive, rent-seeking sectors like real estate and sugar. That must change. The taxation and incentive structure must favor productive activities over unproductive ones – and open up the economy to women.”