EDITORIAL: Interestingly, the latest Gallup Business Confidence Index report shows that the country’s business owners are about 42 percent less pessimistic about the future than they were last quarter. That means, effectively, that while they accept lingering business insecurity because of the prevailing political and economic crises, they also expect things to get better beginning with the next quarter.
But since the same survey also reflected little confidence in the current caretaker setup, much of the business community seems to count on the post-election administration to pull the country in the right direction.
The report also shows that concern about rupee devaluation and fuel price appreciation has taken a back seat to issues like increased taxation and load shedding going forward.
Yet while there is no doubt that continued IMF (International Monetary Fund) support will mandate persistent increase in taxes, and cuts in subsidies that may well force more load shedding, those counting on the rupee’s steep decline to be over might be in for another surprise.
For, nothing substantial has held up the rupee, even when it shocked the market and rose after the military cracked down on dollar smuggling across the Afghan border.
And now that the sentiment behind the push has disappeared, and there’s still nothing intrinsic to keep the rupee up, another decline is very much on the cards even if a smooth election is able to buoy it for a while early in the year. Should that happen, which is very likely, you can count on further fuel price hikes as well. So, it’s still too soon to tell whether currency-specific concerns will disappear from future Gallup surveys.
The business community is smart enough to know that the most important requirement in the immediate future is political stability. Without it, there’s no chance of an economic revival. And now that the road to the election is clear enough – with the Supreme Court itself removing all hurdles from it – the business elite is cautiously optimistic, from the looks of the survey at least, about a more conducive environment in the next few quarters.
Hopefully, a smooth transfer of power – the number-one demand of all external donors as well – will make it easier for the next administration to negotiate a softer programme with the IMF. It ought to be clear by now that cost-push inflation does not respond well to tight monetary policy, and the high interest rate environment has clearly done more harm than good. Businesses are no doubt eager, perhaps even desperate, for a looser lending regime as they look to rebound in the new year.
But that, it must be noted, will only be possible if the new government is responsible enough to break from tradition and stop crowding out the private sector if and when interest rates do come down. All said and done, perhaps the best interpretation of the Gallup survey is that the business community is hoping against hope that things will finally begin to get better after they’ve been so bad for so long.
Copyright Business Recorder, 2024
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