More Darnomics
The budget is near so the government’s pro-investment/growth posturing is understandable. But the finance minister’s ‘selling’ of Pakistan’s investment potential to foreign diplomats still made for an interesting, and instructive, lesson in Darnomics. Perhaps Dar sb forgets that the kind of investors he was luring are known for their sharp due diligence, especially after the great ’08 crash. And there are a number of potentially lucrative yet risky investment destinations that they wouldn’t touch with a ten-foot pole precisely because of the uncertainty associated with them. It is because of the habit of lose risk management in the past that they now place risk above reward before spending.
And, really, they need look no farther than Pakistanis’ own spending and investment patterns as their finance minister woos outsiders to the homeland. It turns out that we are looking out, particularly to Dubai’s once-again buoyant property market, for the bulk of our investments. And you won’t find their finance ministry advertising their worthiness. Prudent policy and the upcoming Expo 2020, among other things, have again made it secure for high level investment. So Dar sb will excuse the more serious foreign investors for not taking his ‘haven for investment’ rhetoric at face value.
But there is more good news. The state bank’s cut the rate to a 42-year low 7pc. The government is already out about how investment, local at least, is about to start pouring. But, again, it forgets that the bold step also brings us into unchartered territory. More than a few analysts have questioned the wisdom since no effort has been made to improve the transmission mechanism. The rate has been on a downward trend since 10pc, yet private investment has shrunk. The government remains the biggest taker from the money market, and its addiction to borrowing shows no sign of slowing. Plus the security situation is dismal despite the operation. Success in Fata and return of cricket are appreciated, but when people are routinely gunned down by the score, little confidence is inspired, especially outside Pakistan. The government is advised to review its priority list. Whatever steps are taken to trigger investment, it must be ensured that the cart is not put before the horse.
