It is better to teach a man to fish than give him fish!

Hassnain Javed

JANUARY 28, 2020

 

 

If you watch the news, chances are you have come across statement by government officials on how our economy is on the right track? How the current account deficit has turned into a surplus and that our exports have surpassed our imports but the economy is a complicated subject for a common person like myself.

In order to better understand it, we need to get deep into details. According to reports, our balance of payments status changed from a current account deficit to surplus. It seems like good news and we are hearing appreciation for the government, but you claim it is not what is seems and that the Prime Minister doesn’t know what he’s “bragging” about. It is harsh critique.

But, this critique is based on facts the on-going reality checks. It is important to understand the success philosophy which is duly mixture of preparation and luck. Selected (again harsh) in literal sense our very respected elected Prime Minister came on mere luck who lacks the clue to handle the boiling pot which has been overcooked by previous chefs and now own verge to spill out. Moreover, to gain success it is essential to know how to manage failure.

The point is, the high unemployment rates, poverty and the difficulties faced by mass audience and not taking harsh stand would be none less than a crime. Statistics tell us exports have not increased. Then where are we getting the money form? Without exports there’s no point to incoming money neither have the remittances from migrants working outside doubled. Borrowing money from the US and parking it in Pakistan to earn interest-based profit and then send it back to the US does not serves Pakistan. Pakistan only can benefit if foreign investment establishes industries and assets such as power stations, dam, ports, canals and best utilize the China Pakistan Economic Corridor.

You don’t win wars singing patriotic songs. You need tanks, warships, armored cars, fighter planes etc. And they all run on petrol. Petrol is bought with dollars, dollars are earned via exports, exports are only possible with industrial development

As I have explained in my previous article “Hot Money route to no Money”. It is of significance to clear our mind from where this money is coming from ? The current account surplus is in actual not surplus these dollars are borrowed, it is debt. The government is taking loans and private entities are investing those dollars outside the country. If it isn’t a joke, then what is? But the prevalent economic team is of opinion that in order for our economy to stabilize they sought help. What other choice did they have?

But keeping in view our economic history it seems it is repeating itself. Until 2003 for every $100 of goods exported, Pakistan imported goods/services worth $125. This mean we had a trade deficit of 25%. There were some remittances, capital income and some debt rest we generally borrow enough to offset the deficit then. Now for every export of $100, our imports worth $230. This explains deficit of 25% has risen to 130%. This deficit can now neither be offset by remittances nor can any other capital influence do wonders. The only available option is to seek debt. There is a supermarket near my house where a separate section is allocated for cat and dog food. You can also find shampoo for your pets and we import all of this stuff.

One-third of Pakistani children are malnourished but we are importing dog and cat food from dollars we borrow from lenders. I demand the government ban all unnecessary imports. Levying duties or increasing them will not work just simply ban them. We should not import food at the cost of loaded debt for future generations. We do not need apples form New Zealand or chocolates from Switzerland. Some 5% of the population can afford such luxuries the rest hardly get by with three modest meals a day.

By having 17% GST, our industries cannot survive. It should be brought down to 5% so industries can be developed and perform. This will catalyze employment and exports to generate a genuine surplus. However, both suggestions will cause revenue to drop, but we can cover for both of the aspects. Firstly by cutting down on non-development spending. I am neither suggesting of setting austerity measures or selling cows in the name of austerity. We have 42 divisions in the government in Islamabad alone such as the division for National Harmony, National Regulation, National Heritage etc. Somebody please tell me what’s the use? The Post Office used to be a part of the Communication Ministry but now it’s a separate ministry. Previously it had one Director General and one Additional DG. Now we have one DG and nine ADGs for the Post Office. I don’t remember the last time I posted a letter and I’m sure you have not either. When I talk about cutting non-development spending, it includes defense as well. We need to open this debate now. There are two heads for the defense budget, which includes combat expenditure and non-combat expenditure.

Combat expenditure is not something I believe I am expert to form opinion. But other than that, we see a big chunk of the defense budget that has nothing to do with wars. On the way to Peshawar from Lahore via GT Road you will find a cantonment every 40km. They were built in the British Raj when they were engaged in wars against the Afghans. There were three wars with imminent threats of attacks and the enemy was Russia in Tsarist times. Now we have fostered friendly ties up to Moscow. We need to shut down those cantonments. Why have we kept them? The same way we have a Coast Guard. For some historical reason, the Coast Guard was under the Army. The Navy claimed that the seas were its territory and the Coast Guard must be handed over to it. Therefore, instead of handing it over to the Navy they created another force called the Maritime Security Agency. Now there are two forces doing the same work. So, there’s a lot of room to cut noncombat defense budgets. Why am I stressing this? If I have more spending but my income doesn’t reconcile with it. If there’s no hope for the income to increase. I must cut my spending. It’s as simple as this we don’t talk about cutting expenditure and whenever we have to cut the budget,we slash development. So, we can’t build power houses, roads, schools or dispensaries.

But non-development budget, both civil and military never see a decrease. They, in fact, only increase. Slashing defense and non-development expenditure are necessary to avoid a deficit. Deficit can crash the economy. It has, in fact, collapsed and we are now figuratively on the ventilator. The day we stop taking loans, we’ll go bankrupt, we won’t survive. You don’t win wars singing patriotic songs. You need tanks, warships, armored cars, fighter planes etc. And they all run on petrol. Petrol is bought with dollars, dollars are earned via exports, exports are only possible with industrial development. If we shut down industries there will be no exports and thus no dollars. This would result in our inability to buy petrol which means our tanks and warships will remain in silos and we won’t be able to fight our wars. In order to fight wars, we need a strong economy.

No matter what the government policies are how they affect people is important. Pakistan genetic DNA ordering is weak otherwise Pakistan as a nation can unite as one.

I will end my discussion by again taking inspiration from our neighborhood China “it is better to teach a man to fish than give him fish”. Therefore, we try our best to promote the local industries and build strong export base to combat the future challenges.

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