Still riding on tailwinds
Depending too much on tailwinds – that the World Bank says will benefit Pakistan’s economy over the near- to medium-term – can be dangerous. True, CPEC investments, Iranian re-entry into the global market, and persistently low oil prices will help the local economy. But these are, without exception, exogenous factors, not the result of home-grown policy. Should the winds turn without warning – which they have been known to – there is little to fall back on. In fact CPEC, which is all the rage for the moment, might become too big to handle should the economy turn.
Much of the multi-billion dollar investment must, after all, be provided sovereign guarantees. According to experts often cited in the press, this will push the overall debt burden to the $90b mark. And unless exports increase by at least 50 percent over the next four to five years, the fiscal pressure might well be unsustainable. Unfortunately, though, the government is happy riding ‘tailwinds’ instead of overhauling exports and other avenues of revenue generation. There is no denying that CPEC is the biggest windfall to have come Pakistan’s way in quite a while. But if mismanaged – which can never really be ruled out – this can turn into not just an economic but also a diplomatic disaster.
The World Bank, though appreciating the ‘consolidation’ achieved over the last year, is also apprehensive about a possible spending hike just ahead of the next general election in ’18. Going by precedent, such concerns are always genuine. Sadly the government has not put much attention to putting the economic house in order. There are mega projects aplenty, but hardly any structural upgradation. Revenue collection is, as always, the heart of the problem. Yet both tax collection and exports are in nosedive. That leaves more and more borrowing, even to run day-to-day affairs of the government, as the most convenient alternative. If serious action is not initiated immediately, the government will need the tailwinds to last at least till the next election.
