History cannot be undone; however, the complacency that crept in can somehow be brought to the surface. Given the external debt and perennial shortfall in current account each year, Pakistan will not be able to maintain and protect the value of its currency against the dollar.
Pakistan: a state and its citizens in state of denial – I
It is not a matter of sovereign default; it is a matter of a sustainable state. This is a numerical truth that cannot be camouflaged with political and security rhetorics.
The objective of this article is to begin a social movement in this regard that should lead to giving birth to greater appreciation of the ground realities undertaking corrective measures. If this is not done then other alternatives will appear as vacuum cannot persist under the natural laws. States disintegrate due to economic crises. The USSR and Yugoslavia are very recent examples.
The gravity of the situation is also required to be understood in politico-social terms. In 1991, the worth of Pakistan Rupee was 31 to 1$ whereas Indian Rupee parity was 32 to 1 $. Today, it is Rs 229 against Rs 85. It is necessary to examine what happened in Pakistan between 1991 and 2022, which brought us to this pass. In this writer’s view, the first difference was Dr Manmohan Singh (born in Chakwal).
In a 2005 interview with the British journalist Mark Tully, Singh said:
I first became conscious of the creative role of politics in shaping human affairs, and I owe that mostly to my teachers Joan Robinson and Nicholas Kaldor. Joan Robinson was a brilliant teacher, but she also sought to awaken the inner conscience of her students in a manner that very few others were able to achieve. She questioned me a great deal and made me think the unthinkable.
She propounded the left wing interpretation of Keynes, maintaining that the state has to play more of a role if you really want to combine development with social equity. Kaldor influenced me even more; I found him pragmatic, scintillating, stimulating. Joan Robinson was a great admirer of what was going on in China, but Kaldor used the Keynesian analysis to demonstrate that capitalism could be made to work.
These remarks are enough to demonstrate the depth of knowledge about human interaction with politics and conflicting ideas of capitalism with leftist leanings of the Nehruvian era. Then the second mark is Delhi School of Economics where Dr Singh used to teach. The level of the institution and its contribution are reflected as under:
Among the faculty at the department of economics have been the likes of V.K.R.V. Rao, B.N. Ganguly and K.N. Raj (all three of whom went on to serve as vice-chancellors at the University of Delhi), Amartya Sen (Nobel Laureate), Manmohan Singh (the former Indian Prime Minister and also the key architect of the economic reforms since 1991), Sukhomoy Chakravarty (who was chief economic advisor), Jagdish Bhagwati, Kaushik Basu, Arjun Kumar Sengupta, Partha Sen, Raj Krishna, Syed Mohammad Ali, the economic historian Tapan Raychaudhuri and others;
The department has been associated with three important journals over the years. It publishes the Indian Economic Review, several faculty members edit the Indian Economic and Social History Review, and for many years it housed the Journal of Quantitative Economics.
The last part is even more important. Dr Singh only has one house which he built after his retirement on a 300 sq yard plot of land in Chandigarh.
What is required to be seen is that when Dr Singh was installed as the Prime Minister of India in 1991, India was facing the worst economic crisis and one of those crises related to the power sector. There were hundreds of seasoned politicians available with the ruling Indian National Congress, but Indians gave the reins of economic sovereignty to a simple person who was ready to live in Delhi or Chandigarh not in New York or Washington. The other person was a bureaucrat Montek Singh Ahluwalia (born in Rawalpindi), son of our soil, the Deputy Chairman Planning Commission.
After spending years in the profession and in government relations, this writer is almost sure that Pakistan’s problem is the lack of competence of the government in the matter of economic policy, not the corruption at the government level.
There is so much vacuum that even people like us, only being an accountant, become somewhere relevant. This vacuum cannot persist.
We are faced with constant intellectual corruption in the sense we believe that this part of the subcontinent had enough capability to run a state. We do not seem to have it. We are very bad as rulers, to say the least.
When physical strength was the criterion of being a ruler then we were ruled by Afghans. When intellect is required then we may necessarily require some additional input. There is no harm in learning and if the option is available just across the Wagah border we are not ready to open trade with India, except for buying active ingredients for pharmaceuticals, however there can always be institutional cooperation between our universities as India’s institutions such as Delhi School of Economics.
The other difference was the flight of capital from Pakistan in the shape of over-invoicing of plant and machinery, when such imports were made out of fund provided by Development Financial Institutions (DFI) funding from 1950 to 1990 and then ‘free for all’ after Protection of Economic Reform Act, 1992 (PERA).
Pakistan had PICIC, IDBP, Bankers’ Equity Limited and National Development Finance Corporation. It is true that all these institutions provided foreign currency loans for the import of plant and machinery for industrialization in Pakistan. In that process, however, we made the following two fundamental errors:
There was no concrete plan to the effect that on a national level the industries so established would have contributed foreign exchange for the repayment of the debt. Almost all the industries were catering to own consumption or their contributions to exports were insufficient;
A ‘sum’ was retained outside Pakistan, formally or informally, in the name of commission on purchase of such plants. Obtaining a loan from a DFI required greasing the palms of those in power, whether civil or military. The amount so siphoned off ultimately became the liability of the Government of Pakistan and was deposited in the accounts of the industrialists and the rulers in adequate percentages.
Copyright Business Recorder, 2023
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