- Not far from detonation
There was only so long the government could juggle the record current account deficit, cutback in aid, drop in remittances and, of course, comatose tax and export earnings with a straight face. Now, going into the election, there’s a good chance of this time bomb finally exploding before people vote in a few months. The numbers in the Debt Policy Statement 2017-18 might be astronomical – external debt rising to 120pc of foreign exchange earnings and to 290pc as percentage of forex reserves – but surely nobody in the national assembly could have been too surprised. Those in the House know best, after all, how the government is addicted to debt and even the prime minister’s kitchen cannot run without it.
Those with slightly long memories will know that when low earnings combine with an inability to manage debt, austerity measures are not too far behind. And PML-N will have trouble selling its motorways and mega projects to voters struggling with sticky wages, rising prices and a generally stagnant economy. Also, such a scenario delivers the kiss of death to that other prized avenue of forex inflows – foreign investment. Already political instability – completely decoupled from the capital market – has caused a stock market rout and a troubling investor exodus.
The finance ministry can toss the blame round all it wants – even holding the situation in the Middle East responsible for our squeezed fiscal space and chronic deficit – but the fault lies squarely with the government. At no point in its tenure, or previous tenures for that matter, did it expand the tax net or add value to exports. With the basic income generation machinery constantly paralysed, the government borrowed its way right through the electoral cycle. It even diluted the state bank’s soft monetary policy by almost completely crowding out the private sector. And now, with earnings not reviving anytime soon and remittances and aid on the decline, the weight of its economic policy failure is about to come down hard on the common man.
Agree absolutely with the Editorial. NO, the PM’s kitchen would NOT feel the pinch, not even his Chauffeur’s. But if the common man with limited income has to purchase tomato at Rs 300 a kg, the heavens will shake-up.
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