The year that was


No denying the bearing of outside influences on economic policymaking, but when an entire year’s growth trajectory follows exogenous flows, there is something inherently flawed in power centres. All was well in the finance ministry till the international commodity market jacked up cotton prices and Arab spring and recession worries engineered increasing remittances. Of course, smiles dropped when the cotton boom was priced out of the commodity market and oil remained elevated despite pronounced growth slowdown in the financial north.
Yet all that is bad has not been unfairly thrust upon the government, and Islamabad cannot claim being taken by surprise by international developments. The cotton windfall was circumstantial at best, and those thinking otherwise have been exposed as inappropriate, to say the least, to occupy seats that affect financial decision-making. In fact, the domestic situation has been cause for much more alarm. Despite Dr Sheikh’s tough talk, the government has not been able to free itself from its largely self-imposed financial straight jacket. The PSE burden has not been shed, indicating continued preference for traditional political maneuvering despite the obvious negative economic spill-over. Tax collection remains compromised, with no hint of the posturing needed to brush up the FBR and build provincial tax collection capacity to benefit from the 18th amendment. Then there is blatant, inexcusable, unprecedented government borrowing, crippling private sector expansion and ridiculing monetary policy calculus. The tight fiscal space has also minimised public spending when most needed to upgrade social overhead capital and ease labour market pressure. The rupee’s losing streak, too, has not been offset by export base expansion.
Still, in debris lies opportunity. So long as it is in the dark as to what to do, the government can at least figure out what not to do. And a good starting point would be not repeating ’11 mistakes. There was little encouraging in the year that has been. But at least what must be avoided is a lot clearer.