- It’s the economy, again
The State Bank’s latest Foreign Direct Investment (FDI) figures for the first half of the current fiscal– down 2.8pc year-on-year despite Chinese inflows increasing 2.4 times – means the economic time bomb will go off after all, as repeatedly warned in this space, just as PML-N steps up its election plans. Already the spin about motorwatys and power plants is failing in face of grave news from the real economy, especially the fiscal deficit deep in red, and how it will have a very pronounced impact on the common man’s life.
The headlines about the FDI flight come at an awkward time for the ruling party; and indeed the country. PML-N will not mention it at election rallies, but its complete failure to expand the tax net or breathe some life into export earnings is the number-one reason for the unprecedented deficit. And its addiction to borrowing, even for its day to day functioning, diluted the soft interest rate environment and crowded out any private sector investment that might just have stimulated employment and earnings. Now, with the US (our biggest donor) pulling the plug, comatose tax and export earnings, remittances on the decline and FDI also packing up, Islamabad will have no choice but to go back to the Fund sooner rather than later.
The political environment, unfortunately, remains far too toxic for the economy to find much mention in the mainstream. Yet it was just this disregard for financial consequences of political actions that led to the recent rout that turned our stock market from Asia’s best performing in ’16 to the world’s worst performing in ’17. As national earnings continue to fall through the floor a round of belt tightening that hits middle and lower incomes very hard becomes inevitable. Eventually, the voter might find the elections more about the economy than politics even if the politicians do not.
