So who is right?

A couple of weeks ago, I quizzed those ambitious of leading Pakistan in the near future, which ambition for me at least is a paradox that I would rather not elaborate upon, about their economic plans. Arguing, and concluding, that economic freedom trumps, for want of a better word, all other kinds of freedom, including speech and media, and that economic dependence impairs sovereignty, I had submitted that perhaps an unmanageable debt burden was perilous for Pakistan. However, I now confess that the idiot box has humbled me.
Let us all admit that we are not very smart. We can easily be hoodwinked by businesses through snazzy marketing and glitzy advertising to buy products we don't necessarily need and we can even more easily be bamboozled by analysts and anchors on news channels in believing narratives which they unquestionably cannot know much about themselves. All of us are gullible enough to be sitting ducks for arguments from perceived authority on the idiot box, which in most cases just might just be hogwash. How can a Pakistani journo ever be in a position to doublethink the Pentagon or accurately analyse the mess in the Middle East?
Notwithstanding that we never ever question the credentials of those creating noise around us, we are also afflicted by the confirmation bias. We only believe information that confirms whatever we already believe in; we hate to be wrong. In a nation absolutely divided on partisan lines, as we are today, truth is the biggest casualty. Nobody can be right or wrong all the time, but since we have become bitter political enemies, we cannot accept the other side's view point at any cost.
And there are two viewpoints on the economy; poles apart. According to one school of thought the economy is performing much better than where it was a decade ago. The GDP is on a growth tangent, there have been huge investments in infrastructure and power generation, inflation has been controlled, and tax collection has grown at record levels. Debt was a necessary evil for improving infrastructure and the debt to GDP ratio is still manageable. Admittedly, imports are up but that was primarily due to much-needed machinery imports and with incentive packages already announced exports will eventually take off, and in any case CPEC will take care of everything else. Except for the political hiccup, everything is moving in the right direction and the economy is poised for takeoff; a view held by most foreign analysts.
The other side obviously posts a rather dismal picture. The most important components of GDP, investment and trade balance, have shown a worrying and perhaps irreversible decline. The tax policy hampers qualitative growth as it favours traders over manufacturers and the aggressive unreasonable actions of the tax collectors have further marginalised local businesses. The debt is at unmanageable levels and the capacity to pay is more relevant than an abstract debt to GDP ratio. Unproductive and unaffordable infrastructure was never the solution; we need cheap electricity and not electricity at any cost to be competitive in the international markets. Trade deficit is crippling the economy and an already struggling domestic industry will not be able to compete with more efficient Chinese manufacturers who have been given complete tax exemptions. The external economy will result in rupee devaluation and eventually result in importing high levels of inflation, which was only kept in check by low oil prices rather than government policy.
I think I have covered most arguments from both sides and in isolation you could argue that both sound reasonable. Albeit, things continue to get even more complicated; GDP is still rising whilst the rupee continues to lose its value, which everyone, surprisingly, agrees will result in inflation. So who is right?!
To digress a bit, managing currency requires reserves; meaning the State Bank of Pakistan needs dollars to defend the rupee value and with declining reserves, the decision to devalue might be a fait accompli. If you think about it that is frightening! Further, on a separate note, if we did not trust IMF when they asked us to depreciate our currency, how can we trust them when they ask us to privatise and open our markets?
Notwithstanding, faced with two equally, arguably, reasonable narratives, who should the common Pakistani believe? After all, for all you know neither is completely wrong or completely right. Assuming, against all odds today, we did want to choose honestly from amongst the two narratives, we are incapable of doing so, because when it comes to the economy, we are complete dodos. The bigger problem is that the experts discussing the national budget on television are in almost all cases either partisan, or probably cannot even balance their personal budgets!
Dear reader, you could at this point ask, why is it important to decide which narrative, if at all, is correct? Simply it is essential to know where you are to move forward, to finalize a plan; this is the part I missed earlier and was rudely awakened to by all the ranting on the economy on the boob tube. As an example, if you are lost in a shopping mall, until you know where you are, you cannot get to where you want to be! All future economic policies and actions, or inaction, are entirely dependent on where the economy stands today; so we have to get it right!
And how do we do that? Well we first need an independent group of experts; the key word being independent, because half of us are going to be very disappointed in the end. But even before that, we must decide; do we even want to know where we are or would we rather prefer to continue with our delusions so as to egoistically maintain our respective positions- I am right!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])