Uncertainties | By Dr Farrukh Saleem

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Uncertainties


UNCERTAINTY kills-kills an economy. Relative certainty, on the other hand, attracts investment, creates employment opportunities and boosts GDP growth.

Lo and behold, right now we have uncertainties galore. Political uncertainties, economic uncertainties and policy uncertainties.

Uncertainties galore. How will the civil-military relations fold out? Can PTI’s alliance with MQM, PML(Q), BAP and GDA weather the upcoming storm? Will the PTI be able to keep the pressure groups led by Pervaiz Khattak and Jahangir Tarin within its fold? Then there are economic uncertainties.

Will the Pakistani rupee continue its free fall? Will we get back under the IMF umbrella and at what cost? How will the common Pakistani survive with the skyrocketing inflation? Why is the FATF adamant on keeping us in the grey list? Will the fast growing trade deficit finally bust the balloon?

Over the past 40 months we have seen at least four ministers of finance come and go; 8 Federal Bureau of Revenue (FBR) chairmen come and go; 4 Board of Investment (BOI) chairmen come and go; 5 Finance Secretaries come and go; 4 Commerce Secretaries come and go; 7 Inspector Generals of Police in Punjab come and go. And that leads us into three types of policy uncertainties.

First-uncertainty about “who will be making the policy decisions that have economic consequences.” Second-uncertainty about “what policy decisions the people who end up in charge will make.” Third-uncertainty about “how particular policy decisions will affect the economy.”

On top of all the political, economic and policy uncertainties we have the Tehreek-e-Labbaik Pakistan (TLP) marching on Islamabad, the Tehreek-e-Taliban Pakistan (TTP) going violent, China unhappy, America angry-and Afghanistan on the brink of famine. Pakistan has seen relative certainty and much better times in the past.

Political and economic certainty during the Ayub-era (1958-1969) brought in heavy investment in manufacturing and translated into a GDP growth rate of 10.4 percent in 1965 (although the war of 1965 brought GDP growth down to 5.8 percent in 1966).

During General Agha Mohammad Yahya Khan’s tenure (1969-1971), political and economic uncertainties-plus the war of 1971-brought GDP growth sharply down to 0.5 percent.

Under Zulfikar Ali Bhutto (1971-1977), political and economic uncertainties made GDP growth quite volatile, fluctuating from a low of 0.8 percent in 1972 to a high of 7 percent in 1973.

Then came ten years of General Mohammad Zia-ul-Haq with a lot of political certainty in-tandem with certainty in economic policy.

This relative certainty boosted our GDP growth to a high of 10.2 percent in 1980-the second highest rate of GDP growth on record.

This was followed by 2 years of Benazir Bhutto, 2 years of Nawaz Sharif, 4 years of Benazir Bhutto and 3 years of Nawaz Sharif.

This was a period full of political uncertainty and a lack of certainty in economic policy resulting in a low rate of GDP growth all through the 11-year period.

Then came nine years of General Pervez Musharraf-political certainty and certainty in economic policy. Result: solid GDP growth with a high of 7.5 percent in 2004.

Unfortunately, it has been downhill ever since with a high of 5.8 percent in 2018 and a low of 0.5 percent in 2020.

In 2011, the IMF produced a ‘working paper’ titled ‘How Does Political Instability Affect Economic Growth?’ The ‘working paper’ collected data from 169 countries over a period beginning in 1960 till 2004.

Conclusion: “Higher degrees of political instability are associated with lower growth rates of GDP…”

To be certain, extreme political polarization is killing our economy. Extreme political polarization destroyed Zimbabwe, Venezuela, Georgia, Ecuador and Columbia. Polarisation is now destroying Turkey. This notion that ‘you’re either with the PTI or you’re against the PTI’ is killing us.

Pakistanis have somehow started mixing up their political party affiliation with their social identity. This notion that ‘all of PTI’s opponents are corrupt’ is damaging our polity-and our economy.

Economically, we are being left behind by our neighbours. Economic history is witness that we used to be ahead of them all.

We need two things to get back on track: political consensus and economic certainty. We have done it in the past. We can do it again.

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