Conflicts, Pandemic And Economy – OpEd By Asad Ali
The Covid pandemic, endless conflicts in the world have left severe economic downfalls and implications worldwide. Every state has suffered badly due to the global economic slowdown, caused by the pandemic. However, developing states were mostly affected by these endless conflicts and pandemic. A new survey finds that inflation now tops the list of perceived economic hazards in respondents’ home countries and geopolitical conflicts remain a top threat to the global economy. Geopolitical instability remains the top-cited threat to the global economy, as it was in March 2022, and inflation has overtaken volatile energy prices to become the second-most-cited concern. Supply chain disruptions round out the top three global risks, followed by volatile energy prices and rising interest rates. Worries about geopolitical conflicts, among other risks to growth, now exceed executives’ concerns about Covid-19 pandemic. Overall economic optimism continues to decline due to global uncertainty regarding conflicts.
Pakistan is among those countries, who had to bear the brunt of global economic recessions. Likewise, it is pertinent to mention that due to the instant actions of government, Pakistan’s economy is now on the track of solid recovery. However, the political landscape of the country is giving another twist to the economic recovery. Unfortunately, few senior politicians, bureaucrats and other economic experts, at others’ behest, are deliberately running propaganda against state institutions and overall economic situation of the country. Their remarks are creating havoc/ panic among economic circles, which are harmful for the economic growth of the country. These experts are doing this propaganda to accomplish political interests of different individuals.
For instance, there’s negative perception, routing in Pakistan that the country is going to default in near future and we may have to face Sri Lanka like situation at home. On the other hand, these perceptions are far from reality and nothing to do with current economic situation of the country. There are clear indicators, which categorically implies that Pakistan’s economic situation is strong and there’s no threat to our economy. For example, before bankruptcy, Sri Lankan foreign debt was 40-45% of its GDP while Pakistan’s debt is around 20% of its GDP. Likewise, the commercial share of Sri Lanka in FX debt was 22% while Pakistan stands at 5%. In addition to this, Sri Lanka received international loans at higher rate as compare to Pakistan. Furthermore, during Covid era, Sri Lankan government had refused talks with IMF for economic recovery program. And after Ukraine conflict when oil prices increased drastically, Sri Lankan government had no funds to make payments for its oil imports.
Another reason for Sri Lanka’s default was availability of zero Euro in bonds while Pakistan has 2 billion dollars in 2022 and will have 2 billion more in 2024. So, Pakistan can make its payments easily. Pakistan also has 3.8 billion unpledged gold reserves other than cases reserves and if required, Pakistan has billions of worth of rice and other agri products available to raise funds. Therefore, there’s no harm in its international payments.
The criticism against Pakistani government and its economic situation is mere a political slogan, which is being used as political bargaining tool not more than that. The fact is that the conflict in Ukraine has severely affected global economy. Similarly, it has affected Pakistan as well. But, now Pakistan is on the path of economic recovery. Even, IMF is satisfied with Pakistan’s economic recovery program and therefore it has agreed to provide bailout package to the country. The staff-level agreement with Pakistan reflects IMF is comfortable with Islamabad’s state of economy.
However, Pakistan should focus on increasing bilateral trade volumes with friendly states and must reduce its imports, as it will decrease pressure on local currency. The increasing import bill is major reason for depreciation of local currency. It should also focus on Foreign Direct Investment (FDI) instead of abnormal external borrowing. The government should prioritize food security through quotas and prices caps instead of subsidizing squandering industries. Development of oil refineries and enhancement production capacity should also be prioritized to gradually phase away from expensive imported refined petroleum products.
The revival of IMF program will help the government overcome the economic crisis because the release of installments of loans from the fund will encourage other international financial institutions to engage with Pakistan. In a nutshell, Pakistan doesn’t presently face the grim meltdown seen in Sri Lanka, but policymakers would be unwise to ignore the lessons to be learnt from the Sri Lankan economy. Last but not the least, politicians and other economic expert must not proliferate distorted facts for mere political gains. They should follow the government indicators to highlight positive outcomes of the policies instead of creating panic and fuss in the minds of common masses. At international level, to counter this, there is a need to rebuild domestic and global institutions so that they better harness the power of large corporations and can redirect technological change.
The writer is Islamabad based expert of strategic affairs.
Conflicts, Pandemic And Economy – OpEd By Asad Ali