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EDITORIAL: One of the enduring lessons of economic downturns is that they run households, especially middle- and lower-income classes, into the dreaded debt cycle. And that is precisely what mounting inflation and unemployment have triggered in Pakistan.

For newspapers are suddenly flush with features quoting breadwinners who are no longer able to provide for their families as before.

There’s a very clear pattern. First, they cut costs when and where possible, starting with cheaper and fewer meals. Then they downgrade their children’s schools; with ever larger numbers pulling them out altogether and turning to cheaper religious seminaries.

And then, when monthly bills alone dwarf their paychecks, they turn to borrowing towards the end of each month – paying off those loans by borrowing more from other sources before the deadline runs out. And so, they enter a vicious circle that few are ever able to escape, especially when the economic outlook is as gloomy as Pakistan’s.

These trends ought to rattle the government in Islamabad. But it is conveniently able to look the other way because it is around for a very short time and has its hands full with arranging the election and making sure IMF’s “upfront conditions” are not violated. Still, authorities need to take notice because this is not the kind of downturn that will go away quickly.

All the people’s problems – inflation, unemployment, bloating bills, increasing school fees – will continue to worsen for the foreseeable future, and beyond. Because even if the current IMF programme is successfully completed, which will require more pounds of flesh from the public, there will be a very urgent need for another one, with similar if not harsher conditions.

Now we have a country buried under debt full of people caught in the debt cycle. Even if we factor in a turnaround a few years down the road, for the sake of argument, we will still have to face much worse poverty, literacy and nutrition rates, just to name a few.

Unfortunately, the state does not have, nor seems likely to have anytime soon, the kind of fiscal space that such socioeconomic disasters demand. It’s simply unable to cut taxes or extend subsidies, in the present circumstances, because of ironclad agreements with the IMF.

It could, however, lend an ear to what the IMF chief just told the caretaker prime minister on the sidelines of the UN General Assembly and finally drag big time evaders into the tax net. But that requires the kind of will and muscle that our ruling elite, democratic and military, have never been able to exercise.

Yet a state that cannot protect its citizens from the debt cycle is condemned to watch as its standing declines on the global stage. Pakistan has no shortage of critics ready to declare it a failed state, with some justification, and now they have all the ammunition they need.

The first order of business ought to be raising enough revenue to go back to the Fund and demand lighter conditions. And that, once again, will require taxing the mafias and special interest groups that the long arms of the law have never reached in this Islamic republic.

Going forward, if they remain unfairly and illegally protected, then honest, taxpaying common people will drop further down the food chain, and a demographic disaster will build even as the country bends over backwards to arrange more bailout loans from international institutions and friendly countries.

History books are full of other lessons also, like what happens when a household debt cycle inflates into an unsustainable bubble and then bursts, forcing people to turn their helplessness into rage against the state itself; something we came dangerously close to when the shock of August’s electricity bills forced people onto the streets. Therefore, whatever needs to be done must be done quickly.

Copyright Business Recorder, 2023

Comments

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Aamir Sep 23, 2023 11:46am
In Pakistan there is no concept of family planning. We have children beyond our means. In an adverse situation there is not back up or resources or income and then this debt trap happens. Please do not produce children you cannot afford. Need a one child policy like China
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KU Sep 23, 2023 11:50am
The article should have started with, ‘’One of the enduring lessons of economic downturns is that tried and tested politicians and their servants, especially the under-trial ones along with the ones with unexplained wealth beyond means, should only see the light of jails and long jail time’’. The UN has pointed out to Pakistani leaders the increase in poverty levels to the tune of 92 million people in our country as well as reminded them about the unnecessary expenditures by the PDM government and the current one. What the UN doesn’t know is that our leaders are resilient in all things but virtue and honesty, and now when they see the land of opportunity going to tatters, they will beg hither tither to ensure their bloodless heists continue. The tragedy in the making and very forthcoming is the return of the criminals, who were convicted by courts, back to parliament. Not surprisingly, the media reports their return as hopeful for the country. Pathetic surely.
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Usman Sep 23, 2023 01:34pm
@Aamir , how about learning skills and earning more and exporting more.what has children got to do with poverty or richness.
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Johnny Walker Sep 23, 2023 02:39pm
Do the forces guys read newspapers?. Doubtful. If somehow this article is read by our great helmsman, the Hafiz, maybe, just maybe, he might mobilise the conscription of the tax evaders into paying due taxes. But I doubt it if this will happen. Well, one can at least dream.
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wanker Sep 24, 2023 12:01am
Who are these people lending to uncreditworthy individuals?
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Aamir Sep 24, 2023 09:22am
@Usman, learning skills and quality education are very expensive. People cannot even feed children resulting in stunted brain and growth. How can you make them productive assets. We cannot sustain 25 crores plus anymore. Plus look at our resources and size and already we are the 5th most populated country. It's a disaster.
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Sohail Sep 25, 2023 12:02am
@Usman, it has a lot to do with the number of children. If you will have one or max two children you can spend more on education. And also quality of life will also improve
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Sohail Sep 25, 2023 12:04am
@Aamir , you are absolutely right. I have a serious concern on ones intellect who believes having more children in Pak will help in generating more revenue
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