If political and economic crises feeding off of and into each other tend to characterize the last gasps of dying republics, as history bears out, then Pakistan can’t be very far from falling over the edge. On the one hand, the market is simply unable to look beyond the politics.
How much investors, just like companies’ stock prices, win or lose depends more on which political alliance outfoxed the other and what the court had to say about it than mundane things like fundamentals, technicals or earnings.
And the rupee has been decimated more than anything else because one prime minister, in the political heat of the moment, went back on assurances to the IMF and froze energy prices. That quickly led to a Balance of Payments (BoP) crisis that has led to nightmarish ‘prior conditions’ to revive the bailout facility; which promptly burned through household savings and much of PML-N’s political capital alike.
On the other hand, the politics is consumed by the economy as well. When the foreign minister went to Washington, the number-one item on his agenda was resetting ties so the IMF programme could be salvaged and a possible sovereign default avoided. When the prime minister went to Turkey he all but pleaded with Erdogan for more direct investment in Pakistan. Ditto for their trips to Riyadh, Abu Dhabi and Beijing.
The Chinese agreed to rollover a two-and-a-half-billion-dollar loan, but the only commitment everybody else gave was that they’d be happy to lend a hand (read billions of dollars) once the IMF was back; proof that even begging is becoming ridiculously expensive. Perhaps another ominous sign of the impending collapse — begging becoming more difficult for a country whose day job is begging to survive.
How does it look, really, for a country with under $8 billion in reserves and bending over backwards for a tranche of $1.2bn from the IMF when it must pay back more than $40bn in debt and interest on debt in this fiscal? You’ll never think about it because that’s not what the headlines tell you. What they do bombard us with is foreign conspiracies dislodging our governments, people blocking Lahore’s Liberty market every time the PTI chairman frowns, how the “people’s mandate” is doing in its “jihad” for “haqiqi azadi” against the “imported government” and, lest we forget, that PTI was gobbling prohibited funds all along after all.
This will change a lot, surely, because PTI will lash out in typical fashion — a good offence is the best defence? — and ultimately the courts will have to deliver yet another verdict that will be made controversial and further polarize society and send whatever investment we have left, foreign and local, bee-lining to the departure lounge.
Ironically, it will also throw a monkey wrench into Imran Khan’s own dream of a snap general election; waltzing back to the PM house with a two-thirds, if not absolute, majority. Because no matter how much he and his social media legions rubbish the ECP, ‘Mr Clean’ will still have to come clean in the spotlight of the highest court in the land before he can snowball his momentum from the Punjab by-elections all over the country and all the way to the centre.
So what will happen next? Nobody knows anymore; not even the so-called establishment, it turns out. What if Imran’s people force the election and the IMF bails out? What if — not that it’s likely — Imran gets disqualified and turbo charges his agitation? What if – and this is very likely — the government, desperate as it is to take the wind out of PTI’s sails, leverages the ECP verdict to go all in? The one sure thing to come out of any or all of the above is more uncertainty, no matter which way you look at it.
So the future might not be more of the same of spicy politics with the all-seeing establishment cracking its whip every now and then; it might well be about politics degenerating to the point of the country tumbling into default, and the hell it will unleash for the fifth-, or was it fourth-? largest population in the world.
In the immortal words of Yogi Berra, “The future (just) ain’t what it used to be”.
Copyright Business Recorder, 2022
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