They call this ‘stability’

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NOW that ‘Naya Pakistan’ has been thrown into the dustbin of a very short-lived history, and the tabdeeli
they promised has only been manifest in the form of greater inflation, a shattered rupee, draconian laws
on the expression of freedom, and even signs of incompetence at the diplomatic level, the PTI
government and its desperate supporters are suggesting that we have finally reached a state of ‘stability’.

One is reminded of a couplet by Faiz which goes ‘Yeh dagh dagh ujala’, while rephrasing subsequent lines
in terms of our current predicament — ‘voh intizaar tha jis ka, yeh voh tabdeeli tau naheen’. If this is the
promised tabdeeli which has finally led to a supposed state of stability, we are in the midst of a much
graver crisis than we could have imagined.

The extensive public use of the notion of ‘stability’ is of very recent vintage. Clearly, tabdeeli had to take
its natural course of time to settle in before any stability could emerge; and perhaps it took about a year.
If one does a ‘forensic analysis’ — another invention of Naya Pakistan — of the frequent use of the term
‘stability’, one would probably find it being used in the media regularly, since the last few weeks. While
the agreement between the hurriedly put together new Pakistani economics team with the IMF was first
announced on May 12, followed by the federal budget which was clearly a blueprint from the IMF
agreement announced exactly a month later, and with the executive board of the IMF finally giving their
approval after much apprehension in official circles, stability is said to have finally arrived on July 3 this
year.

This financial year will be the worst in over a decade in terms of how it affects the working
people of Pakistan.

While so-called independent commentators on the economy have lapped up this term, perhaps it was
the new governor of the State Bank of Pakistan, rushed in from the IMF, who was the first to give the
term ‘stability’ official sanction. Due to his ample and laudatory services for the IMF, as well as much
foresight learnt from his colleagues, he must have been the first to know that Pakistan was well on its
way to stability and growth long before the July 3 official approval of the IMF programme. As early as
June 17, he had announced that the worst was over, and that ‘the country is moving towards stability’.
Let us see exactly what all has led to claims of this stability over the last few weeks.

Read: Pakistan reaches agreement with IMF, to receive $6 billion over 3 years

A good example, one which is clearly in the domain of the governor of the State Bank, is the dollar-rupee
exchange rate. After his declaration of stability, in the last week of June the Pakistani rupee lost Rs5.50 in
value against the dollar in a single day, to miraculously recover Rs6.60 in the week after on July 2. Most
economists would call this mayhem, or excessive volatility, but perhaps such events simply imply that the
economy was fast ‘moving towards stability’.

Read: Forex market: SBP keeping a close eye, will intervene in case of excess volatility, governor says

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Perhaps the State Bank governor could be forgiven his claim, and one could suggest that the particular
event was just a one-off episode, yet, the fact that the rupee has cumulatively dropped in value by 1.22
per cent, or Rs1.92, just in the last five days, suggests that we are nowhere close to any form of ‘stability’.

One could also add other indicators, such as the price of gold, which increased by 2.11pc in just a single
day this week to its highest level ever of Rs82,000, but perhaps we are just beginning to move to some
stability in terms of its price. If the price of the dollar or of gold is subject to volatility and fluctuation at
frequent levels, perhaps it would be advisable to examine, supposedly more stable, indicators to counter
the stability claims.

On the same day, that gold rose to its so far highest all-time price this week, the governor of the State
Bank stated that ‘things are getting better’. Now that the IMF agreement has been made very public, let
us examine just how much better things are going to get and how much more stable Pakistan is about to
become.

Probably the most striking aspect of the calculations from the IMF having ramifications on revenue, jobs
and investment is that Pakistan’s GDP this financial year is going to be a mere 2.4pc, the lowest in a
decade. If the just-concluded fiscal year ended with a dismal 3.3pc growth rate, the lowest in five years,
this year of stability promises much more.

Moreover, in the last fiscal year, inflation was a mere 9pc, the highest in five years. This financial year of
stability till next July promises an inflation rate of anywhere between 13pc and 16pc, probably even
higher as the year proceeds. Every single indicator, from tax collection to the elimination of poverty, to
investment rates in industry to achieving an extraordinary 8pc increase in exports, is going to appear in a
state of shambles this time next year. The only possible improvement will come to the current account
deficit, even as Pakistan’s debt burden, both domestic and international, will increase manifold.

While one understands that the job description of government officials includes putting a spin on facts by
suggesting that ‘stability’ has or is about to be achieved, or that ‘things are getting better’, numerous
lackeys of the government vying for their TV talk-show opportunity, often having no understanding of
basic economics, repeat the same. A more truthful assessment of things would help us accept,
understand and adjust to what is about to come.

One can safely predict that this financial year will have far higher inflation, the rupee will lose
substantially more value, and with fewer jobs and increasing poverty, will be the worst in over a decade
in terms of how it affects the working people of Pakistan. The only ‘stability’ and consistency one can
expect is that things are going to get considerably worse.

The writer is a political economist.

Published in Dawn, July 14th, 2019

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