The staff-level agreement with the IMF, the seemingly unstoppable coronavirus, and Khaqan Abbasi opening his heart out, have been hogging the media space. Together, it has been a spell-binding mystery novel that you rip through, developing your theories only for the next page to undo them.
Kudos to the Prime Minister and his economic team to have successfully staved off the misery of a mini-budget that we all feared, without forsaking the next tranche of $450 million that will further buttress our growing foreign exchange reserves. It couldn't have been easy.
Thank you PM, and the team. Thank you State Bank profits, falling oil prices, development budget cuts, provincial cash surpluses - or whatever it took - for preventing more taxes and higher utility prices.
We also appreciate the reduction in petroleum prices, especially when we were petrified at the thought of the hand of non-tax revenues reaching deeper into our depleted pockets. And let's toss out the crib of government gypping Rs 20 per litre by way of additional petroleum levy.
We have no idea how the spiraling 'circular debt' will be tamed without culling the energy subsidies through an increase in bijli and gas prices. As our parents drilled into us, sometimes it is best not to ask inconvenient questions. Let's live for the day and reconcile to the mysterious 'add-ons' we see every month in our utility bills.
Nor do we wish to know how the FBR-IMF duel panned out. Whatever charm our team used, it clearly worked. Our economic Cassandras may keep reminding us that we are headed towards a shortfall of at least 600 billion rupee against the revised target of Rs 5.23 trillion, but we would rather live to fight another day. If the end-year fiscal deficit crosses 8% of GDP, something that the spoilsports keep hinting at, we can always have our rejuvenated external sector thumb its nose at them.
Then there is coronavirus. Mostly you get good tidings out of China but this is bad as news can be. The whole world is scurrying to protect itself against it; quarantining anyone suspected of an infection, cancelling flights and events, and making N95 masks a scarce commodity. It is the best of times to travel - airlines, hotels, car rental companies - all offering attractive discounts. It is the worst of times to travel -just the thought of being in close proximity to who knows what he or she is carrying keeps you off the plane.
It takes us back to the Spanish flu epidemic that took away more than 30 million lives. It reminds us of the panic that Ebola and Avian Flu created. It is not much of a solace to be quoted statistics to show more people die of ordinary flu; that heart-related issues are more threatening than COVID-19.
It does not end with human suffering. Nature's bioterrorist is pummeling markets.
In the last one week Pakistan stock exchange dropped by 5.6%, the biggest weekly decline in the last 20 months. Dow Jones fell by some eleven hundred points, the biggest single-day drop in its history. They say markets around the world have lost something like $4 trillion in the wake of coronavirus-induced supply shocks. Markets are beginning to rally on the back of quick assurances from central banks, but fears persist.
Apple has warned investors of revenue losses because supply-chain problems were limiting iPhone production. Hyundai has cut production in South Korea due to shortage of parts that were mostly sourced out of China. Jaguar too is facing a huge CKD parts inventory crisis. The eminently sensible just-in-time management philosophy is in tatters.
It is not a conventional economic threat. The last time the world squared up to supply shocks was in the 70s, when reduction in food and oil supplies led to stagflation. There was unemployment and there was inflation. The policy makers fought over what needed to be rescued first: unemployment or inflation. The inflation-fighters prevailed. Inflation-control has been the central banks' rule book ever since.
Typically, Central banks view inflation as a monetary phenomenon. Today, however, much of the developed world faces deflation, obliging the central banks to push interest rates towards zero (or below). They also pumped in money, a practice quaintly named quantitative easing. Still, deflation has remained defiant, making the academics question the money supply-inflation correlation.
With simultaneous shocks to demand and supply, central banks are desperately scratching the bottom of their tool bag. They can ease monetary policy and governments can provide strong fiscal stimulus - tax cuts and increased government spending - to bolster demand. But what can they do to fix global supply chains? Global integration is in jeopardy and MNCs love affair with China under strain.
Pakistan's was already going through a demand shock. Now supply disruptions appear imminent. How will we cope with both together? Options are severely limited. The fiscal consolidation imperatives pretty much rule out tax cuts or increased government spending. There is some headroom in the monetary policy tank, but how much can you reduce interest rates without, forget inflation, risking the external sector?
Between coronavirus and the IMF we have a problem. Let's pray IMF changes its script.
NAB is the bewildering part. Why would they lock up people for extended periods and never be able to make out a court-worthy case? They are leaving the courts with little choice, and in the process making people taller.
Khaqan Abbasi's interviews to the media have added a few more inches to his 6 foot 3 frame. The impressive articulation of his case, his refusal to buckle down, his graceful acceptance of the sufferings that he was put to without due process or cause, have made him look good and the government bad.
And that is the great mystery of it. Why would government choose battles that it can't win?
People are all for government's anti-corruption campaign. They want those who have benefited at their cost taken to task and the looted wealth returned. By not being able to do either Government affords its critics a chance to shout victimization, while its supporters rankle at the mystery of failed attempts.
Among the good, the bad, and the mysterious we have a nation oscillating between hope and despair. Let's improve the odds by being more open and less mysterious.
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