Uncertain times

Hopefully, by the time this article gets published, things have settled down for the better; more to the point, let us pray that the madman across the border is restrained permanently. And to be honest the term "Madman" is not provoked by any prejudice or innate hatred but rather its genesis is purely in common sense; only a madman can embark upon such kind of brinkmanship, and that too between two nations armed to the teeth with nukes, for the sake of winning an election. Unless sanity prevails and the international community makes serious efforts for de-escalation, the end result, irrespective of Pakistan's efforts not to be roped into a fatal conflict, will not be pretty; again this is not beating a doomsday drum, but being simply logical.
Undoubtedly, despite certain minority views on social media by the irksome "know it all" brigade, military strategy is best left to the Generals. Albeit on a lighter note some of the content on the social media is absolutely hilarious even in these testing times; good to know us as a nation have not lost our sense of humour. On the other hand, one is quite averse to outsider views on decisions taken by the leadership till now, or offering of suggestions for future actions or inactions in the current situation; the best we can do is stand united as a nation and provide unequivocal support to the defenders of our borders. Ironically, only last week it was asserted that perhaps defence takes priority over educating the nation, since the nation has to exist to be educated.
But irrespective of the prayers to come out favourably on the military front, conflict also has economic consequences and while the economic team is mostly irrelevant in devising a military strategy, it needs to step up and get prepared for managing a war economy on priority basis. Perhaps lessons need to be learnt from the previous wars on the economic front as well, but considering that the last experience was decades ago, this will not be very easy.
An out of control fiscal deficit will be the least of the Finance team's worries already. Whether anyone likes it or not, prioritizing production of goods and services that support the war effort and measures to prioritize defence expenditures are a given.
For me the fridge example best illustrates the monetary impact of war on citizens; not sure who should get the credit for it though. Imagine that rather than dropping bombs, the army was throwing refrigerators at the enemy. In order to do that either the army comes to our homes and takes our refrigerators or we pay the army money to buy new refrigerators. Essentially, the outcome for both options is the same and the only gainers are refrigerator manufacturers. The demand and hence the price for refrigerators goes up and since the disposable income of everyone gets proportionately reduced, all the other stores will face a decline. This kind of low demand in other sectors can result in stagflation. In these circumstances, monetary policy will be largely ineffective, assuming it was ever effective, in managing inflation in the first place; controlling prices of necessities may not be a choice as the economy is reconfigured to allocate resources for essential defence needs.
Profiteering, including from hoarding is another challenge. Notwithstanding the patriotic fervour, every nation has its share of Shylocks. Even ignoring human greed, logistics are bound to get disrupted because of the need to create supply lines to the borders for the troops. War alone is a logistic nightmare, fending for a nation of over 200 million in a state of war will require proactive actions. The weakest link in such proactive planning will be our antiquated data collection mechanism, which should therefore be the focus. Without up to date information of production and warehousing, the situation getting chaotic is an understatement.
Uncertain times require confident actions. Once again the objective is not to create hysteria or war hype, however only fools sit idle while time rushes by; the wise prepare for any eventuality. To be honest, one has multiple times asserted that the only helping hand is attached to one's own wrists. The past few days have probably already made it crystal clear to us who exactly are our friends in need. Fortunately we are self sufficient in most aspects, but where we are not nudging consumption to match available resources may be required. Albeit a hallmark of good management is honest and forthright communication in challenging times, quite the opposite of political rhetoric in normal times. The nation needs to be told to consume less and save more.
Inflation, more taxes and more debt are a given; how much and what else will depend on the actions taken in these uncertain times.
(The writer is a chartered accountant based in Islamabad. Email: [email protected])