Tag Archives: Economy

Time for a consensus on economic policy

Raza Rumi

The recent decision of the federal cabinet to rationalise General Sales Tax (GST) and levy a one-time flood surcharge are much-needed reforms to bolster Pakistan’s elusive and perhaps unattainable ideal of economic self-reliance. A state, which has perfected the art of collecting and negotiating rents for its strategic games, is least interested in creating a redistributive welfare state.

The emergence and fortification of a rentier state, therefore, is neither peculiar nor new as phenomena. However, it has now come to haunt the future of the country due to the evolution of rent-seeking culture, which is almost a way of life. We need no half-baked perceptions-based studies from abroad to know that crude and sophisticated forms of corruption are now embedded in our public life. From the delivery of a basic service to the purchase of a submarine, this is the way the country functions. The elites have strengthened trends such as tax-evasion and made them legit mechanisms of governance and public affairs.

Tragic that the world leaders such as Hillary Clinton had to remind Pakistanis about how they were not willing to pay up in the face of the 2010 floods devastation and were continuously looking towards the West and international community at large. Such a debate should have emanated from Pakistan’s Parliament and its patriotism-obsessed media. But this did not happen as all barons are averse to paying taxes in this country. Continue reading

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Addressing the challenges – a short term agenda

Raza Rumi

Strange things are happening. Two months after a natural disaster hit millions of people and created essential prerequisites for an economic meltdown, the focus of Pakistan’s ruling elite — elected and unelected — remains on power politics. As if the utter lack of preparedness to cope with a disaster was not enough, the response to the disaster and its monitoring by a holier than thou media is baffling.

The primal cause of the post floods mismanagement, if were to believe the analysts on prime time TV and opinion piece writers from the press, is the corrupt clique headed by Mr. Zardari. Those with the most religious bent of minds have cited a divine wrath as a cause of this calamity. A few right wing newspapers have even blamed the United States and India to have caused this natural disaster to punish Pakistan for its nuclear weapons. The genesis of such intellectual confusion and distortion of public debate lies in the way the Pakistani mind has evolved into a hydra-headed, paranoid and militarised being. This has been the greatest contribution of the Pakistani state to shape and craft a society that places a premium on nuclear weapons over citizen welfare and which demonises the political process and celebrates religious militancy as a just cause. This is why militarism of a softer variety is back in full force.

Undoubtedly, Pakistan army has done a tremendous job in rescuing people and ensuring that relief efforts are well-executed. However, this is neither unusual nor a matter of surprise as it happens to be an organised institution. But to apply this success in an emergency situation by a force trained to deal with urgent situations onto the domain of national governance brings back the central issue of Pakistan’s statehood: the unresolved and now perhaps a permanent civil-military imbalance. It started with the TV channels eulogising army efforts and creating a binary between the army and the civvies — a half truth and a rhetorical polemic with little substance. This was followed by calls for army intervention by the MQM and its nemesis, Mr Imran Khan. Luckily, for Pakistan the Generals appear to be in no mood to intervene and rock the applecart. Well, at least for now. Continue reading

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How Mistrust of the Government is Hurting Pakistani People and Why Should We Trust

By Raza Habib

Going through the national and international media, one keeps on getting the impression that despite the staggering magnitude of the havoc inflicted by the flood, the response, both domestic as well as international, could at best be termed as sluggish. Given the fact that a huge area is still inundated and catastrophe in the form of widespread disease is looming, the response apparently shows a nonchalant behavior. Internationally almost every famous website and newspaper is pointing towards apathy of the international donations. But the buck does not stop at the international response as unfortunately the domestic response is also mirroring it.

So what could be the reason for this kind of response . The spirit which was seen the earthquake relief in 2005 is not being repeated at the international as well as domestic level.

There are basically two reasons for that. Firstly and perhaps more importantly is the loss of credibility of the State, particularly the government, nationally as well as internationally. This is a serious issue and is hampering the process of donations and aid accumulation. Consequently the people of Pakistan are suffering. Second issue is that the world is still underestimating the damage due to this calamity.

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THE GREAT RECESSION, THE EUROPEAN FISCAL CRISIS AND LESSONS FOR PAKISTAN. Part 3: The European Debt Crisis

The Exploding Debt in Europe

By Kashan Wali, exclusive to the PTH

 

Wealth cannot be artificially created

Finance in a real world relies on underlying wealth of a society. Governments cannot create wealth by printing money. Print too much money and it will lose its value. A fall in the value of money leads to inflation. Inflation viciously attacks the value of savings of the population. As population loses the stored wealth, the population becomes dependent on the state. State has to pay more now for healthcare, education and in extreme situation, food and shelter for population that is going poorer by the day. Either way, unless the underlying wealth (net output of goods and services produced) does not increase, a country cannot become wealthier.

Let’s say state tries to pull another trick here; it starts borrowing heavily from the investors to boost its cash reserves. A smart market will quickly catch on to the trick as it analyzes the conditions of the local economies to see if this state has good books and stable revenues. If investors decide that the state cannot pay off its liabilities in the future, it will charge a lot more in interest rate to justify taking that excessive risk. Investors may decide not to lend at all to a government running shady practices.

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THE GREAT RECESSION, THE EUROPEAN FISCAL CRISIS AND LESSONS FOR PAKISTAN. Part 1: Background, The Roaring 90s and the rise of leverage

 

By Kashan Wali, exclusive to the PTH

Today is May 08, 2010. As I write these line it occurs to me that this weekend is one of the most critical weekends as the seven month long crisis that started with initial doubts about Greece’s ability to pay off the massive debt that Greece had accumulated. The world nervously watches the European debt crisis morph into a contagious financial nightmare. Investors are worried that indebted nations like Greece, Portugal, Spain and even UK have accumulated too much debt too soon.

Coming on heels of the subprime crisis in 2007 and 2008, the world economies and the financial system are still in the recuperation phase from the wounds inflicted from the subprime crisis and the subsequent Great Recession afterwards. Below, we examine the European debt crisis in more detail. We will also look at the lessons for Pakistan and other emerging countries. There are a lot more similarities between the Greek tragedy and the Pakistani fiscal conditions. For those who do not learn from others mistakes end up being others down the road.

But first let’s take a step back to the subprime crisis that had the fiscal implications for the United States and Europe. Even before the subprime crisis, let’s examine the roaring 1990s that were a direct result of the massive globalization unleashed with the arrival of the internet. This was an important decade as two most populous countries properly entered the global economic arena for the very first time. They were China and India. For the next two decades, we see an explosive growth in the world economic output, globalization of trade, fall in industrialized world inflation, falling yields and the rise of phenomenon called the “leverage”. A few decades from today, we may exclaim what a shame that such prosperity became a victim to excessive leverage and regulatory failure. Yet we have countless examples of this reckless behaviour throughout the human history.

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Pakistan’s economy: Hard times

by Raza Rumi

Two years after the civilian government took office, there are few signs of economic recovery and this does not augur well for the fate of democratic governance in Pakistan. We are somehow doomed to bear the brunt of authoritarian regimes in social and economic terms. By the time a civilian government puts its house in order, the long and short marchers are ready to take over. The story this time has been no exception. Following the trends of the 1960s and the 1980s during the Musharrafian decade, unsustainable growth rates were touted as the raison d’etre for the apparent efficiency of a military regime. It is true that the Musharraf era inducted Pakistan into the globalized economic system, boosted domestic demand for consumer products and attracted huge doses of foreign assistance shortly after the military decided to ditch their erstwhile strategic allies, i.e. the Afghan Taliban. But it left the country in dire straits – bankrupt, politically polarised and mired in the worst inflation of our times.

The signs of economic fatigue and food inflation had appeared during Musharraf’s last year in power. An unprecedented energy crisis also plunged the nation into literal and metaphorical darkness and the global recession caused an economic slowdown all around. Consequently, from the high growth-rate of 6 percent, we were in the lowest growth category, even in the poor South Asia region. A 2.2 percent growth rate implies that our current population increase per annum is untenable. Similarly, the highest ever recorded inflation of nearly 25 percent in 2007-2008 also hit the fixed-income citizenry and the millions of poor, depriving them of basic sustenance. Continue reading

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Bigotry In The Indian Premier League And The Bigger Picture

By Yasser Latif Hamdani

What I am about to write may hurt my Indian friends and I am sorry.  There are crooks, cranks and madmen in every country including India and there is no exaggeration in what I write.  I am merely writing from the heart as I always do.

Much has been said about the Indian Premier League’s decision to leave out Pakistani cricketers in the year that Pakistan is the defending World Twenty20 Cricket Champion.   Indians have come up with the stupidest excuses – excuses that cannot and should not make sense to any reasonable person.    But then we are not dealing with reasonable people. Continue reading

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